Could refinancing your mortgage actually save you money? It can, but a lower interest rate by itself does not tell the whole story. Refinancing replaces your existing mortgage with a new loan, and the new loan may come with closing costs, a different repayment term and a different monthly payment.
That's why the better question is not simply, "How much lower is the new rate?" You also want to know how much your monthly payment could change, how much the refinance costs, how long it could take to recover those costs and how the new loan affects your total interest.
This free Mortgage Refinance Calculator helps you compare your current mortgage with a potential refinance. Enter your current loan balance, current interest rate, remaining term, new interest rate, new loan term and estimated refinance costs to explore the difference.
You can also choose whether to pay the estimated closing costs separately or add them to the new mortgage balance. This gives you a more realistic starting point for comparing different refinance scenarios.
This calculator was created by Revisiting Tools as an educational planning tool. It uses the information you enter to estimate mortgage payments and compare simplified refinance scenarios.
The calculator focuses on principal and interest and estimated refinance costs. It does not predict every fee, tax, insurance change, lender requirement or future change in your financial situation.
Calculator results are estimates, not mortgage quotes or loan offers. Always compare the results with the official loan documents and disclosures provided by your lender.
Mortgage Refinance Calculator
Compare your current mortgage with a potential refinance and estimate the new payment, monthly savings, refinance costs and simple payment break-even period.
Enter the approximate principal balance you still owe on your current mortgage.
Enter the annual interest rate on your existing mortgage.
Enter approximately how many years remain on your current mortgage.
Enter the estimated annual interest rate offered for the refinance.
Choose the repayment period for the new mortgage.
Enter your estimated refinance closing costs and other eligible refinance expenses.
Choose whether the estimated closing costs are paid separately or added to the new mortgage balance.
This calculator provides estimates for educational purposes. Actual refinance payments, closing costs and savings can vary based on the lender, loan terms, credit profile, property, fees and other factors.
What Is Mortgage Refinancing?
Mortgage refinancing means replacing an existing mortgage with a new mortgage. The new loan is generally used to pay off the old loan, and you then make payments under the new loan's terms.
Homeowners may consider refinancing when interest rates change, their financial circumstances change or they want different loan terms.
For some borrowers, the main goal is reducing the interest rate and monthly payment. Others may want to shorten the repayment period or change the type of mortgage they have.
The important point is that refinancing creates a new financial comparison. The old mortgage and the new mortgage should be evaluated together rather than looking at the new rate alone.
Why Do Homeowners Refinance?
There are several reasons a homeowner might investigate refinancing. The best reason depends on the borrower's circumstances and the actual terms available.
- Potentially obtain a lower interest rate
- Reduce the monthly principal-and-interest payment
- Change the mortgage term
- Potentially reduce total interest
- Move from one type of mortgage to another
- Adjust the structure of the mortgage
A refinance can be useful in some situations, but it is not automatically beneficial. Closing costs and the new loan term can change the result significantly.
How Does the Mortgage Refinance Calculator Work?
The calculator first estimates the principal-and-interest payment on your existing mortgage using the current balance, current interest rate and remaining term.
It then calculates a potential new mortgage payment using the current loan balance, the new interest rate and the new loan term.
If you choose to finance the closing costs, those costs are added to the new mortgage balance before the new payment is calculated.
The calculator then compares the two payment amounts and estimates the difference.
If the result is positive, the estimated new principal-and-interest payment is lower. If the result is negative, the new payment is higher.
What Is Your Current Mortgage Payment?
Your current principal-and-interest payment depends primarily on your remaining loan balance, interest rate and remaining repayment period.
The payment estimate in this calculator does not assume that your property taxes, insurance or other housing expenses change simply because you refinance.
That distinction is important because refinancing primarily changes the mortgage itself. Your broader housing costs may continue to be separate expenses.
How Does a Lower Interest Rate Affect a Refinance?
A lower interest rate can reduce the amount of interest charged on the money you borrow. If the loan balance and repayment period are similar, a lower rate will generally produce a lower principal-and-interest payment.
However, the size of the benefit depends on how much you still owe, how many years remain and the terms of the new loan.
For example, a small rate reduction on a relatively small remaining balance may produce modest savings. A larger rate reduction on a large balance can produce a more noticeable difference.
This is why it is useful to enter your own numbers instead of relying on a general rule about how much rates "should" fall before refinancing.
What Is the Refinance Break-Even Point?
The break-even point is an estimate of how long it takes for the monthly payment savings to recover the cost of refinancing.
For a simple payment break-even calculation, the formula is:
For example, if your estimated refinance costs are $6,000 and the new mortgage reduces your monthly principal-and-interest payment by $200, the simple payment break-even would be:
This is a simplified calculation. It does not attempt to model every difference in loan balance, interest timing, taxes or opportunity cost. Use it as a starting point rather than a guarantee of financial savings.
Why Do Refinance Closing Costs Matter?
Refinancing can involve costs such as lender charges, appraisal costs, title-related expenses and other transaction costs.
Those expenses reduce the financial benefit of a lower mortgage rate. A refinance that saves $200 per month looks very different when the refinance costs are $2,000 compared with $10,000.
That's why the calculator asks you to enter your estimated closing costs instead of assuming that refinancing is free.
Should You Pay Refinance Costs Separately or Finance Them?
There are two simplified scenarios available in the calculator.
Pay Closing Costs Separately
In this scenario, the refinance costs are treated as an upfront expense and are not added to the new mortgage balance.
This means the new loan starts with approximately the same principal balance as the current mortgage.
Roll Closing Costs Into the New Loan
In this scenario, the estimated closing costs are added to the new mortgage balance.
This can reduce the amount of cash required at closing, but it also means you are borrowing more money. That additional balance can result in additional interest over time.
The actual availability of this option depends on the refinance transaction and lender.
How Does the New Loan Term Affect Refinancing?
The new loan term is one of the most important parts of a refinance comparison.
Suppose you have 25 years remaining on your current mortgage and refinance into a new 30-year loan. The new payment may be lower because the balance is being repaid over a longer period.
But that does not necessarily mean the new loan will cost less in total interest. You may be extending the period over which you borrow the money.
This is why the calculator shows both the estimated monthly payment and the estimated total interest for each selected loan scenario.
What If You Refinance Into a Shorter Loan?
A shorter refinance term generally means a higher monthly principal-and-interest payment.
The benefit is that you may repay the mortgage faster and potentially pay less interest over the life of the new loan.
The trade-off is higher monthly cash flow requirements. A shorter loan is only useful if the payment fits comfortably within your budget.
Why a Lower Monthly Payment Isn't Always Better
A lower monthly payment can be attractive, but it should not be the only number you consider.
Imagine that you have 20 years remaining on your current mortgage and refinance into a new 30-year mortgage. The new payment could be lower because you have increased the repayment period.
That may improve monthly cash flow, but it can also mean paying interest over a longer period.
Refinance vs. Keep Your Current Mortgage
The most useful comparison is not simply "old payment versus new payment." You should also consider how long you expect to keep the new loan and how much the refinance costs.
If the refinance saves $250 per month but costs $8,000, the monthly savings need time to recover that upfront cost.
Likewise, if the new loan has a much longer term, a lower payment may come with a longer period of interest payments.
Think of the refinance as a new financial arrangement rather than just a lower interest rate.
How Can Refinancing Affect Total Interest?
Total interest can move in either direction after refinancing.
A lower interest rate can reduce interest charges. A shorter loan term can also reduce the amount of time you pay interest.
However, refinancing into a new longer-term mortgage can extend the repayment period and potentially increase the total interest paid over the full new loan term.
The calculator therefore shows the estimated interest for both loan scenarios instead of assuming that refinancing automatically saves interest.
Current Mortgage vs. Refinance
| Factor | Current Mortgage | Refinanced Mortgage |
|---|---|---|
| Interest rate | Existing rate | New estimated rate |
| Loan balance | Current balance | Current balance plus financed costs, if selected |
| Loan term | Remaining term | New selected term |
| Monthly payment | Current estimate | New estimate |
| Closing costs | Already incurred | New refinance costs |
| Break-even | Not applicable | Depends on costs and payment savings |
Example: Refinancing a $320,000 Mortgage
Suppose you currently owe approximately $320,000 on your mortgage. Your current interest rate is 6.5% and you have about 25 years remaining.
Now imagine that you receive a potential refinance offer at 5.75% with a new 30-year term and estimated closing costs of $6,000.
Enter those numbers into the calculator above and first choose Pay Closing Costs Separately.
Then run the calculation again using Roll Closing Costs Into New Loan.
The second scenario increases the new mortgage balance, which can change both the monthly payment and the total interest estimate.
The example is intended to demonstrate how the calculator works. It is not a recommendation to refinance at any particular rate or cost.
When Might Refinancing Make Sense?
Refinancing may deserve consideration when the potential benefit is large enough to justify the cost and you expect to keep the new mortgage long enough to benefit from the change.
For example, a refinance could be worth investigating if the new interest rate is meaningfully lower, the closing costs are reasonable and the estimated break-even period fits comfortably within your expected time in the home.
Your actual decision should be based on the specific loan offer and your broader financial situation.
When Might Refinancing Not Make Sense?
Refinancing may be less attractive if the new rate is only slightly lower, the closing costs are high or you expect to sell the property before recovering the refinance costs.
It may also be less attractive if the new loan resets your repayment period for substantially longer and increases your total interest cost.
There is no universal refinance rule that works for every homeowner. The numbers should be evaluated together.
How to Use the Mortgage Refinance Calculator
For a useful comparison, start with reasonably accurate numbers from your current mortgage statement and the refinance offer you're considering.
- Enter your current mortgage balance.
- Enter your current interest rate.
- Enter the approximate number of years remaining.
- Enter the proposed new interest rate.
- Choose the new mortgage term.
- Enter the estimated refinance closing costs.
- Choose whether the costs are paid separately or financed.
- Select Calculate Refinance Savings.
Then change one assumption at a time. Testing different rates, terms and closing costs can help you understand which factors have the biggest effect on the result.
Try Several Refinance Scenarios
A single calculation can give you a useful starting point, but scenario testing gives you a better picture.
- Compare the current rate with a slightly lower rate.
- Compare a 15-year refinance with a 30-year refinance.
- Test higher and lower closing costs.
- Pay the closing costs separately.
- Finance the closing costs.
- Compare the monthly payment difference.
- Compare the estimated total interest.
- Consider how long you expect to keep the mortgage.
If a small change in one assumption completely changes the result, that is useful information. It means the refinance decision may be particularly sensitive to that assumption.
Don't Forget the Rest of Your Housing Budget
A refinance changes the mortgage, but it does not automatically eliminate the other costs of owning a home.
Depending on your property, your broader housing budget may include:
- Property taxes
- Homeowners insurance
- HOA fees
- Maintenance
- Repairs
- Utilities
- Mortgage insurance, when applicable
If you want to examine these expenses separately, our Mortgage Payment Calculator can help estimate recurring mortgage and housing costs.
What This Refinance Calculator Does Not Include
A real refinance transaction can contain many details that cannot be accurately represented by one simple calculator.
- Exact lender fees
- Discount points
- Prepaid interest
- Escrow adjustments
- Exact appraisal costs
- Title and settlement charges
- Potential prepayment penalties
- Changes in property taxes
- Changes in homeowners insurance
- Future changes in property value
- Tax considerations
- Individual lender requirements
The calculator is therefore best used for scenario planning. For an actual refinance decision, review the official loan estimate and other documents from your lender.
Explore More Home & Mortgage Calculators
Refinancing is only one part of the home-financing decision. You may also want to look at how much a mortgage payment costs, how much home you can reasonably consider and what other expenses come with buying a property.
Use our Mortgage Payment Calculator to estimate principal, interest, property taxes, insurance, PMI and HOA costs.
If you're still deciding how much home fits your budget, try our Home Affordability Calculator .
You can also compare the financial differences between renting and buying with our Rent vs. Buy Calculator .
Frequently Asked Questions
Here are common questions about mortgage refinancing, refinance savings, closing costs and the break-even period.
What is mortgage refinancing?
Mortgage refinancing replaces an existing mortgage with a new mortgage. The new loan is generally used to pay off the existing loan, and the borrower then makes payments under the new loan terms.
Does refinancing always lower your monthly payment?
No. The new payment depends on the new interest rate, loan balance, loan term and whether refinance costs are added to the loan. Refinancing can result in a lower, higher or similar payment.
How much lower should my interest rate be to refinance?
There is no single rate reduction that makes refinancing worthwhile for every homeowner. Compare the expected payment savings with the refinance costs and how long you expect to keep the new mortgage.
What is a refinance break-even point?
A simple refinance payment break-even point estimates how many months of monthly payment savings are needed to equal the refinance costs. It is calculated by dividing the refinance costs by the monthly payment savings.
Does the break-even calculation include every refinance cost?
The calculator uses the refinance closing costs you enter. It does not automatically identify every fee or transaction cost that might apply to an actual refinance.
Can I roll closing costs into my refinance?
Some refinance transactions may allow eligible costs to be included in the new mortgage. Financing those costs increases the amount borrowed and can increase the interest paid over time.
Is a 15-year refinance better than a 30-year refinance?
Neither is automatically better. A 15-year loan generally has a higher required monthly payment but can shorten repayment and reduce interest. A 30-year loan generally spreads repayment over a longer period and may have a lower required payment.
Can refinancing reduce total interest?
It can, particularly when the new rate or term reduces the cost of borrowing. However, refinancing into a longer repayment period can increase the total interest paid even if the monthly payment falls.
Does refinancing increase my mortgage balance?
It can if refinance costs are added to the new loan. If the costs are paid separately, they are not added to the new mortgage balance by this calculator.
Should I refinance if I plan to sell my home soon?
Refinancing may be less attractive if you expect to sell before the monthly payment savings have recovered the refinance costs. Compare your expected time with the estimated break-even period.
Does this calculator include property taxes and insurance?
No. This calculator focuses on comparing the mortgage principal-and- interest payments. Property taxes and insurance can be considered separately because they may not change directly as a result of the refinance.
Does refinancing change the value of my home?
No. Refinancing changes the mortgage financing. It does not automatically change the market value of the property.
Why is my lender's payment different from this calculator?
A lender's calculation can include exact loan fees, points, escrow, prepaid costs and other loan-specific details. This calculator uses the simplified assumptions you enter.
Does this calculator provide a mortgage quote?
No. It provides an educational estimate. A mortgage quote or loan offer comes from a lender and is based on your specific application, property and loan terms.
Is this mortgage refinance calculator financial advice?
No. This is an educational calculator. It is not financial, mortgage, tax, legal or investment advice.
Mortgage Refinance Calculator: The Bottom Line
Refinancing is about more than finding a lower interest rate. A useful comparison considers the new monthly payment, refinance costs, loan term, total interest and the amount of time you expect to keep the new mortgage.
Use the calculator to test several realistic scenarios instead of relying on a single advertised rate. Compare paying closing costs separately with financing them, and compare shorter and longer loan terms when appropriate.
Most importantly, don't assume that a lower monthly payment automatically means a lower total cost. The new loan should make sense when you consider the complete picture.
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