Should I Refinance My Mortgage?

What this estimate assumes

• Both the current loan and the new loan use standard fixed-rate amortization — equal monthly payments for the full term, with the mix of principal and interest shifting over time.
• The new loan amortizes the same balance you enter over its own new term; this calculator doesn't model rolling closing costs into the loan balance, which would raise the new balance and payment slightly.
• It doesn't account for possible cash-out amounts, rate-and-term refinance nuances, or point costs beyond whatever total you enter in the closing costs field.

How to use this calculator

1. Enter what you currently owe in Current mortgage balance ($) — your current payoff balance, not the amount you originally borrowed.
2. Enter your existing loan's rate in Current interest rate (APR %).
3. Enter how many years are left on your current schedule in Years remaining on current loan.
4. Enter the rate a lender has quoted (or that you're researching) in New refinance rate (APR %).
5. Enter the length of the new loan in New loan term (years) — refinances commonly reset to a fresh 30-year term, but you can enter any length.
6. Enter the total fees you'd pay to refinance in Closing costs ($), including lender fees, title, appraisal, and any points.
7. Click Calculate break-even to see your new payment, monthly savings, and how many months it takes to recover the closing costs.

Worked example

Take the calculator's own defaults: a $300,000 current balance at 7.0% APR with 27 years remaining, refinancing into a new 6.0% loan over a fresh 30-year term, with $5,000 in closing costs.

Current payment: The current loan's monthly rate is 7.0/100/12 ≈ 0.0058333, over the 324 months (27 years) remaining. (1+r)^324 ≈ 6.58312, giving an amortization factor of r(1+r)^n / ((1+r)^n − 1) ≈ 0.0068781 per dollar. Multiply by the $300,000 balance, and the current payment works out to roughly $2,063.44/month.

New payment: The new loan's monthly rate is 6.0/100/12 = 0.005, over a fresh 360 months (30 years). (1+r)^360 ≈ 6.02258, giving a factor of about 0.0059955 per dollar. Multiply by the same $300,000 balance, and the new payment comes to roughly $1,798.65/month.

Monthly savings: $2,063.44 − $1,798.65 ≈ $264.79/month saved by refinancing.

Break-even time: $5,000 in closing costs divided by $264.79/month in savings ≈ 18.88 months — roughly 1 year and 7 months to recover the closing costs through the lower payment.

Lifetime interest: Over the remaining 324 months of the current loan, total interest paid works out to roughly $2,063.44 × 324 − $300,000 ≈ $368,556. Over the new loan's 360 months, total interest comes to roughly $1,798.65 × 360 − $300,000 ≈ $347,515. Even after adding back the $5,000 closing cost, the new loan still costs roughly $16,042 less in lifetime interest — on top of the lower monthly payment.

Conclusion: In this default scenario, refinancing saves roughly $264.79/month, pays for its own closing costs in a little over a year and a half, and saves roughly $16,042 in interest over the life of the loan — a refinance worth taking seriously as long as you plan to stay in the home well past that 19-month break-even point.

Frequently asked questions

What counts as "closing costs" for a refinance?

Typically the lender's origination fee, appraisal, title search and insurance, recording fees, and any points you choose to pay to buy down the rate. Ask your lender for a loan estimate that itemizes every fee, and add them all up for the "Closing costs ($)" field — a number that leaves fees out will understate your real break-even time.

Does resetting the loan term back to 30 years matter, even if the rate is lower?

Yes, a lot. Restarting a 30-year amortization schedule after you've already paid down several years of your current loan means more of your new payments go to interest again before principal catches up, even at a lower rate. That's why this calculator also shows total interest over the full remaining life of each loan, not just the monthly payment.

What if I plan to sell or move before the break-even point?

Then refinancing likely isn't worth it financially — you'd pay the closing costs but move before the lower payment recovers them. Compare your break-even time against how long you realistically expect to stay in the home, not just whether the new rate is lower.

Does this model rolling the closing costs into the new loan balance?

No. This calculator assumes you pay closing costs out of pocket (or at closing) and the new loan amortizes the same balance you enter. Rolling costs into the loan instead would raise your balance and your new payment slightly, which would change the break-even math somewhat.

Should I compare the break-even time to how long I've already lived in my current home?

No — break-even time is forward-looking. What matters is how much longer you plan to stay from today, not how long you've already owned the home. Years already paid down are reflected in your current balance and years remaining, which you enter separately.

Does a lower rate always mean a lower payment?

Not necessarily. If the new loan resets to a longer remaining term than you have left on your current loan, a lower rate can still produce a lower monthly payment, but it can also mean paying interest for more total years. This calculator checks both: it tells you if the new payment is actually lower, and separately shows the lifetime interest difference between the two loans.