Mortgage Refinance Calculator — See If Refinancing Is Worth It

A lower interest rate is tempting — but refinancing only pays off if the savings outrun what it costs to get them. Refinancing replaces your current mortgage with a new loan, usually for the same remaining balance but at a new interest rate and term. It can lower your monthly payment, cut the total interest you pay, or shorten the years left on the home. The catch is that it isn’t free: you pay closing costs up front. So the only question that really matters is whether the savings are worth that cost — and the answer comes down to one number, the break-even point.

The break-even point

Your break-even point is how many months of payment savings it takes to recoup the closing costs:

Break-even months = closing costs ÷ monthly savings

Before the break-even month, you’re still paying off the cost of refinancing. After it, the savings are real money in your pocket. The rule of thumb is simple: if you’ll keep the loan past the break-even point, refinancing pays for itself. If you might sell or move sooner, it may not.

If the new loan doesn’t lower your payment, there’s no break-even at all — there are no savings to recoup the closing costs with. This calculator flags that case instead of showing a misleading number.

A worked example

Take the default scenario: a $300,000 balance at 7% with 25 years left, refinanced to 5.5% over a new 25-year term, with $6,000 in closing costs.

• Current payment (P&I): about $2,120.34
• New payment (P&I): about $1,842.26
• Monthly savings: about $278.08
• Break-even point: about 22 months ($6,000 ÷ $278.08 ≈ 21.6, rounded up)
• Lifetime interest difference: about −$83,420 — you pay roughly $83,420 less interest over the life of the loan

Here the refinance is a clear win: you break even in under two years and save interest overall.

The trap: a lower payment that costs more

A lower monthly payment is not the same as saving money. Refinancing into a fresh 30-year term can shrink the payment while increasing the total interest you pay, because you’re stretching the balance over more years. For example, refinancing a loan with 15 years left into a new 30-year loan can cut the monthly payment by hundreds of dollars yet add tens of thousands in lifetime interest.

Most refinance calculators show only the monthly savings and hide this. This one shows both the monthly savings and the lifetime-interest difference — and warns you when a lower payment quietly raises your total interest — so you can judge the trade-off honestly.

What this calculator does — and doesn’t — include

To keep the comparison clean, this tool compares principal and interest only, and assumes your closing costs are paid up front. It does not model:

• property taxes, homeowners insurance, or PMI (use the Mortgage Calculator for full PITI);
• rolling closing costs into the new loan balance, which raises the loan amount and the interest;
• cash-out refinancing, points paid to buy down the rate, or removing a co-borrower.

These nuances can shift the result, so treat the figures as a planning estimate. Your lender’s Loan Estimate is the authoritative comparison.

This is an educational tool, not financial advice. See our disclaimer.