Mortgage Refinance Calculator
Should you refinance? Put in your current loan, the new rate and closing costs to get the break-even month, monthly saving, lifetime interest difference and a verdict for the years you plan to stay.
| Current monthly payment | — |
|---|---|
| New monthly payment | — |
| Monthly saving | — |
| Break-even on closing costs | — |
| Interest left on current loan | — |
| Total interest on new loan | — |
| Lifetime difference (interest + costs) | — |
| Net result if you sell/move after the years entered | — |
| Verdict | — |
In short
Refinancing pays when the closing costs are recovered before you move: break-even months = closing costs ÷ monthly saving. A $320,000 balance at 6.75% with 26 years left, refinanced to 5.5% over 30 years with $6,000 costs, saves $362 a month and breaks even in 17 months — but the lifetime figure must also count the extra years of the new term.
Who this is for: Homeowners anywhere weighing a lower rate against closing costs and a longer term.
When refinancing pays — and when it does not
- Break-even = closing costs ÷ monthly saving. If you will sell or refinance again before that month, the refinance loses money even though the payment is lower.
- Term reset: moving from 26 years left to a new 30-year loan lowers the payment partly because you are spreading the balance over four more years. The lifetime line shows whether the rate cut outweighs the extra years; to keep the same payoff date, enter the remaining years as the new term.
- Rolling costs into the loan avoids cash up front but you pay interest on them for the whole term.
- Rule of thumb: a rate drop of 0.75–1 percentage point on a large balance usually breaks even in 2–3 years; smaller cuts need a long stay to pay off.
- Cash-out refinances, points (prepaid interest to buy a lower rate) and early-repayment charges all belong in the closing-costs figure.
See also: UK Mortgage Repayment Calculator, Home Equity Loan & HELOC Calculator.
Assumptions
- Payments from the standard amortising formula on both loans; break-even = closing costs ÷ (old payment − new payment).
- Lifetime difference = interest remaining on the old loan − (interest on the new loan + closing costs); costs can be paid up front or rolled into the new balance.
- Stay comparison adds payments made plus the balance still owed on each loan after the years entered; taxes, insurance and tax relief are excluded.
Worked example
Payment falls from $2,179 to $1,817 — saving $362 a month, so the $6,000 costs are recovered in 17 months. After 7 years you are about $19,700 ahead (payments made plus balance owed, both loans). Over the full term the new loan pays $334,100 interest against $359,700 left on the old one, so even with four extra years it saves about $19,600 net of costs.
Frequently asked questions
How much lower should the rate be to refinance?
There is no fixed number — run the break-even. On a large balance 0.5 points can pay off in under three years; on a small balance even 1.5 points may not cover the fees.
Should I refinance to a shorter term?
If you can afford the higher payment, a 15-year loan at a lower rate cuts total interest dramatically; enter 15 as the new term and compare the lifetime line, not the monthly payment.
Does this work for UK remortgages or UAE mortgages?
Yes — it is pure arithmetic. Put the early-repayment charge and arrangement fee in closing costs; UK fixed-rate deals typically run 2–5 years, so set the stay to the deal length.
Is the break-even in months or payments?
Months of the new loan, i.e. the number of lower payments needed to recover the costs.
Is it worth refinancing for 1%?
Usually yes on balances above about 200,000 if you stay 3+ years — run the break-even with your actual closing costs.
Does refinancing restart my mortgage?
Only if you choose a longer term; set the new term equal to the years remaining to keep the same payoff date.
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