Refinance Calculator
Evaluate whether refinancing your mortgage makes financial sense by comparing monthly savings, break-even point, and lifetime interest savings.
About this Calculator
Evaluate whether refinancing your mortgage makes financial sense by comparing monthly savings, break-even point, and lifetime interest savings.
Formula & Calculations
Formula
Monthly Payment = P × [i(1+i)^n] / [(1+i)^n - 1]; Savings = Old Payment - New Payment; Break-Even = Closing Costs / Monthly SavingsWhere:
- B=Current loan balance
- CC=Closing costs for the new loan
- r_current=Current annual interest rate
- r_new=New annual interest rate
- T_current=Remaining term of current loan in years
- T_new=New loan term in years
Assumptions
- Assumes closing costs are rolled into the new loan balance (financed).
- Calculates monthly payment using standard amortization formula.
- Does not account for tax implications or escrow changes.
- Break-even analysis assumes you stay in the home through the break-even point.
Calculation Examples
Example 1
Refinancing from 7.5% to 6.0% saves $248/month. It takes 21 months to recoup the $5,000 closing costs. Over the full term, you save nearly $75,000.
Example 2
Switching to a 15-year term at a lower rate increases the monthly payment slightly but saves over $57,000 in total compared to the remaining 20 years at 6.5%.
Example 3
A small rate reduction with high closing costs may not justify refinancing if you plan to move before the break-even point.
Frequently Asked Questions
When does it make sense to refinance?
Refinancing typically makes sense when you can lower your interest rate by at least 1%, plan to stay in the home past the break-even point, or want to switch from an adjustable-rate to a fixed-rate mortgage. You can also refinance to shorten your term or tap equity.
What closing costs should I expect when refinancing?
Refinance closing costs typically run 2-5% of the loan amount and may include origination fees, appraisal, title search, credit report, and recording fees. Some lenders offer no-closing-cost refinances at a slightly higher interest rate.