About the Refinance Calculator
A refinance calculator answers two linked questions: how much a new rate would cut your monthly payment, and how many months of that saving it takes to recover the closing costs. That break-even point is the number that actually decides whether refinancing is worth doing.
The formula
Break-even months = closing costs / monthly savingThe monthly saving is your current payment minus the payment on the new rate and term. Closing costs cover origination, appraisal, title, and recording fees on the new loan.
How to use this calculator
- 1Enter your Current Loan Balance ($). The field starts at
250000, which you can overwrite. - 2Enter your Current Interest Rate (%). The field starts at
7.5, which you can overwrite. - 3Enter your New Interest Rate (%). The field starts at
6, which you can overwrite. - 4Enter your New Loan Term (Years). The field starts at
30, which you can overwrite. - 5Enter your Closing Costs ($). The field starts at
5000, which you can overwrite. - 6Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Current Loan Balance ($) | 250000 |
| Current Interest Rate (%) | 7.5 |
| New Interest Rate (%) | 6 |
| New Loan Term (Years) | 30 |
| Closing Costs ($) | 5000 |
Result
New Monthly Payment: $1498.88
Monthly Savings: $249.16
Break-even: 21 months
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
If you will still own the home well past the break-even point, refinancing usually pays. If you might sell or refinance again before then, you would be paying closing costs to rent a lower payment for a short while. Most borrowers use a rough threshold of two years or less to break even.
Watch for a saving that comes from resetting the clock rather than from the rate. Replacing 22 years remaining with a fresh 30-year term lowers the monthly payment even at the same rate, but stretches the debt out and can raise total interest. Compare total remaining interest, not just the payment, and consider matching the new term to the years you have left.
Things worth knowing
- A no-closing-cost refinance is not free — the fees are folded into the rate or the balance. It can still be the right choice if you may move soon.
- Refinancing to below 80 percent loan-to-value can remove private mortgage insurance, sometimes worth more than the rate change itself.
- A cash-out refinance converts equity to cash but raises the balance, the payment, and usually the rate.
- Rate-and-term refinances price better than cash-out ones. Keep them separate if you can.
- Do not confuse a lower payment with a cheaper loan. Both matter, and they do not always move together.
Frequently asked questions
How much lower does the rate need to be?+
The old rule was one percentage point, but it depends on your balance and costs. On a large balance, half a point can break even quickly; on a small one, even a full point may not. Use the break-even figure rather than a rule of thumb.
What does refinancing cost?+
Typically 2 to 5 percent of the loan amount, covering origination, appraisal, title insurance, and recording fees. Some lenders waive these in exchange for a higher rate.
Will refinancing hurt my credit score?+
Slightly and briefly. The hard inquiry and the new account knock a few points off, usually recovering within a year. Shopping several lenders inside a 45-day window counts as a single inquiry.
Can I refinance with little equity?+
Often yes. Conventional refinances generally want 20 percent equity to avoid mortgage insurance, but FHA streamline and VA interest rate reduction refinances have far looser requirements and lighter paperwork.