Mortgage Refinance Calculator

Refinancing is a math problem disguised as a phone call from a loan officer. This calculator hands you the math so you walk in already knowing the answer.

• The four moments when refinancing actually pays
• How to find your break-even month to the dollar
• What closing costs and mortgage points really run
• The prepayment penalty that can quietly erase your savings
• When refinancing is the wrong move
• Rate-and-term vs. cash-out, and which one fits your goal
• An eight-point go/no-go checklist

Diana has a $300,000 mortgage at 7.0%. Her payment is $1,996 a month. Rates slip to 6.0%, a lender quotes her a new payment of $1,799, and the savings looks obvious: $197 a month. Then the same lender mentions $4,500 in closing costs, and the decision stops being obvious. Refinancing only wins if she stays in the house long enough to claw that $4,500 back.

Run the division and the picture sharpens. $4,500 ÷ $197 = 23 months to break even. If Diana keeps the home five years, she nets roughly $7,320 after costs ($197 × 60 months minus $4,500). If she's listing the place in eighteen months, she pays $4,500 to save $3,546 and walks away behind. Same rate drop, opposite verdict, and the only variable that flipped was time.

The old rule of thumb says refinance whenever you can cut your rate by a full point. It's a fine first filter and a terrible final answer. A 1% drop on a $150,000 balance moves far less money than the same drop on a $400,000 balance, so the bigger loan can justify higher closing costs that the smaller loan never could. The rate gap tells you nothing on its own. Monthly savings, total costs, and how long you'll stay tell you everything.

A few factors tilt the math before you even pull a quote:

• How far into the loan you are. Refinancing in year two captures most of the interest savings; refinancing in year twenty resets the clock on a loan you've nearly paid down.
• Your equity. Below 20% you're often paying PMI again, which eats into the monthly savings the rate drop just bought you.
• Your credit score. Lifting it 40-60 points before you apply can earn 0.25-0.5% better pricing, and on a large balance that gap is real money.
• Your timeline. If you might sell or refinance again inside the break-even window, the answer is no, regardless of how good the rate looks.

This calculator does that division for your actual numbers and shows the break-even month before you commit. Enter your balance, your current rate, the rate you've been quoted, and the closing costs, and decide from the result instead of the rule of thumb. This calculator provides estimates based on the information you enter. For advice tailored to your situation, consult a qualified professional.

People refinance for dozens of reasons. Four of them carry the weight. Each one is a different bet, and each one lives or dies on a specific number.

1. Lower your interest rate. The classic move. It works best when rates sit at least 0.5-1% below what you're paying now. Drop a $350,000 loan from 7% to 5.5% and you cut the payment by $427 a month and shave more than $77,000 off lifetime interest over 25 years. Aim to break even in under three years and the case makes itself.

2. Shorten the term. Moving from a 30-year to a 15-year loan when your cash flow can absorb a bigger payment is one of the most powerful things you can do. On a $400,000 loan the payment jumps about $580, but you save more than $198,000 in interest, and 15-year loans usually carry a lower rate to begin with.

3. Pull cash out. Borrow above your current balance and take the difference in cash. This is worth doing when the money funds something with a real return, like renovations that add value or paying off high-interest debt, and only when you keep at least 20% equity behind you. Cash-out to cover a vacation is just an expensive mortgage.

4. Trade an ARM for a fixed rate. If your adjustable-rate mortgage is about to reset, locking a fixed rate buys certainty. A 4.5% ARM headed to 6.5% is worth converting to a 6% fixed, because a predictable payment you can budget around beats a cheaper one you can't.

One line of arithmetic decides whether refinancing makes or loses money: total refinance costs divided by monthly savings equals the number of months to break even.

Say your closing costs come to $7,000 and the new loan saves you $427 a month. That's $7,000 ÷ $427 = 16 months. Stay past month 16 and every payment after is pure gain. Leave before it and you've paid for a deal you never collected on.

Read your break-even like a traffic light:

• Under 24 months: green. The deal pays for itself fast and you can move with confidence.
• Two to five years: yellow. Solid, as long as you're genuinely staying put through the window.
• Past five years: red. The savings arrive slowly enough that any change in plans wipes them out, so proceed carefully.

The trap is counting only the rate drop and forgetting the costs that bought it. This calculator includes both so the break-even month you see is the one you'll actually live. This calculator provides estimates based on the information you enter. For advice tailored to your situation, consult a qualified professional.

Refinancing isn't free, and the number is bigger than most people guess. Plan on 2-6% of the new loan amount in costs. On a $400,000 loan that's anywhere from $8,000 to $24,000, with the national average landing near $16,000.

Where the money goes:

• Lender fees ($1,000-$3,000): origination, underwriting, and processing.
• Third-party costs ($1,000-$2,500): appraisal, title insurance, and attorney fees.
• Government fees ($100-$500): recording charges and transfer taxes.
• Prepaids (varies): homeowners insurance, property taxes, and prepaid interest.

Mortgage points are an optional add-on, not a freebie. Each point costs 1% of the loan and trims your rate by roughly 0.25%. On a $400,000 loan, two points run $8,000, drop the rate half a point, and save about $100 a month. That's an 80-month break-even ($8,000 ÷ $100), or 6.7 years. Buy points only if you're staying a decade or more and have the cash to spare.

Watch for the prepayment penalty. Some existing mortgages charge a fee for paying off early, and it can quietly swallow your savings. A typical schedule runs 2% of the balance in years 1-2, 1% in years 3-5, and nothing after that. A 2% penalty on a $350,000 loan is $7,000 out of pocket the moment you refinance. Read your original loan documents or ask your lender directly before you commit. This calculator provides estimates based on the information you enter. For advice tailored to your situation, consult a qualified professional.

Sometimes the smartest refinance is the one you skip. Four situations turn a tempting rate into a losing trade.

• You're moving soon. Selling within two to five years usually means you cash out before you ever reach break-even, so the closing costs are money spent for nothing.
• You're deep into the loan. After 20-plus years most of your payment is already going to principal. Refinancing resets the amortization clock and can pile on lifetime interest even at a lower rate.
• Your credit slipped. Lenders want 620+ for conventional loans, 580+ for FHA, and are more flexible on VA. A lower score means a worse rate, which can erase the savings you came for.
• You're short on equity. Below 20% equity, lenders typically tack on PMI, and that monthly premium can cancel out the rate cut entirely.

If any of these describes you, run the numbers before you run to a lender. This calculator provides estimates based on the information you enter. For advice tailored to your situation, consult a qualified professional.

Both are called refinancing, but they're two different financial moves. One shrinks what you owe or what you pay each month; the other hands you cash and grows the balance. Choose based on what you're actually trying to do.

Rate-and-term refinance keeps your balance the same (or lower) and changes the rate, the term, or both. The goal is a smaller payment, less total interest, or a faster payoff. Closing costs typically run 2-4% of the loan. This is the right tool when rates have fallen, you want to lock a fixed rate, or you're ready to move to a shorter term.

Cash-out refinance lets you borrow more than you owe and pocket the difference. It earns its keep funding renovations, wiping out high-interest debt, covering tuition, or seeding a business, where the money does real work. Costs run higher, usually 3-6%, and you're enlarging your balance, so use it only when the return on that cash is strong and you keep healthy equity behind you.

Name the goal before you name the product, and the choice between them gets simple.

Before you sign anything, run down this list. Hit all eight and refinancing almost certainly pays. Miss a few and it's time to wait or rethink.

• The rate drop is at least 0.5-1% below what you pay today.
• Your break-even point lands under five years.
• You'll stay in the home at least five more years.
• You can cover the 2-6% closing costs, or you've accepted a higher rate to skip them.
• Your credit score clears lender minimums (620+ for conventional).
• You hold 20% equity, or you understand exactly what PMI will cost you.
• There's no prepayment penalty on your existing loan.
• Any cash you pull out is earmarked for a high-return use.

This calculator provides estimates based on the information you enter. For advice tailored to your situation, consult a qualified professional.