🔄 Mortgage Refinance Calculator
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When Does Refinancing Your Mortgage Make Sense?
Refinancing replaces your current mortgage with a new one, ideally at a lower interest rate. The goal is to reduce your monthly payment, shorten the loan term, or tap into home equity. But refinancing isn’t free — closing costs typically range from 2% to 5% of the loan amount. This calculator shows you exactly how long it takes for the monthly savings to outweigh those upfront costs (the break‑even point), and how much total interest you’ll save over the life of the loan.
How to Use This Calculator
- Current Mortgage: Enter your remaining balance, current interest rate, and how many years you have left. If you’re unsure of your exact remaining years, check your latest mortgage statement or use our Mortgage Payment Calculator to reverse‑engineer the numbers.
- Refinance Offer: Enter the new rate, new term, and closing costs. Shop around — even a 0.5% rate difference can justify refinancing if you plan to stay in the home long enough.
📊 Real‑World Example
On a $250,000 balance with 25 years remaining at 6.5%, the current payment is about $1,665/month. Refinancing to 5.5% with $5,000 in closing costs lowers the payment to roughly $1,495 — saving $170/month. The break‑even is 29 months. If you stay in the home beyond that, every additional month is pure savings, totaling around $42,000 over the loan’s life.
Pay Attention to the Break‑Even Point
The break‑even point is the number of months it takes for cumulative monthly savings to exceed the upfront costs. If you sell or move before that point, refinancing loses money. A good rule of thumb: if the break‑even is under 2‑3 years and you plan to stay at least that long, refinancing is likely worth it.
Other Considerations
- Resetting the clock. If you’re 5 years into a 30‑year loan and refinance into a new 30‑year term, you’re extending your debt by 5 years. Consider a shorter term (20 or 25 years) to keep your payoff date close to the original.
- Cash‑out refinancing. Borrowing more than you currently owe takes equity out of your home. This calculator assumes a straight rate‑and‑term refinance (no cash out).
- Credit score impact. Refinancing triggers a hard credit inquiry and temporarily lowers your score slightly. The drop is typically small and recovers within a few months with on‑time payments.
Frequently Asked Questions
Should I refinance if I’m planning to move soon?
Probably not. If you sell before the break‑even point, the upfront costs exceed your savings. Use the break‑even estimate above to make that decision.
What’s a typical closing cost?
Expect 2‑5% of the loan amount. $5,000‑$10,000 is common for a $250,000 loan. Some lenders offer “no‑cost” refinances but roll the fees into a slightly higher rate.
Related Tools
- Mortgage Payment Calculator — See your full PITI before and after refinancing.
- Home Affordability Calculator — How much house can you comfortably afford?
- Compound Interest Calculator — Invest your monthly savings for even greater long‑term growth.
Disclaimer: This calculator provides educational estimates. Consult a mortgage professional for personalized refinance advice and current rates.