How to use the refinance calculator
- Enter your current loan balance, interest rate and the time left on the loan. If you know your exact monthly principal and interest, add it under More options and the time left is worked out from it.
- Enter the new interest rate and new loan term, then the closing costs and points from your Loan Estimate.
- Choose whether the closing costs are paid in cash or rolled into the new loan.
- Read the payment change, the break-even figures, the interest on both loans and the lifetime comparison. Add the years you expect to keep the loan to see the net result at that point.
- Download the CSV or PDF to see both payment schedules side by side.
Formula
Payment = L x r / (1 - (1 + r)^-n) for each loan, r = APR / 12
New loan amount = balance, plus closing costs if they are rolled in
Monthly savings = current payment - new payment
Break-even on payment savings = cash closing costs / monthly savings, rounded up
Net position at month m = payments made so far + balance still owed (+ cash costs for the refinance)
The refinance is ahead in the first month where its net position is lower than staying put
The simple break-even only counts the payment savings. The net position also counts the balance still owed, so it shows when a refinance that restarts the term truly comes out ahead. Lifetime cost compares the total of all payments, plus cash costs, on both loans.
Worked examples
A lower rate, closing costs in cash: $250,000 left at 7% with 27 years remaining has a payment of $1,719.54. Refinancing to 6% for 30 years with $6,000 of closing costs paid in cash gives $1,498.88, which is $220.66 less each month.
Break-even: $6,000 / $220.66 = 27.2, so the simple break-even is 28 months. Counting the balance still owed, the refinance comes out ahead in month 30. After 5 years it is $5,903.39 ahead and after 10 years it is $16,054.49 ahead.
Lifetime view: the current loan has $307,128.21 of interest left and the new loan has $289,593.37. Adding the cash costs, you pay $545,593.37 on the new loan against $557,128.21 on the current one, so lifetime savings are $11,534.84. For a like-for-like comparison, the new loan at 6% over the 27 years you have left costs $1,559.96 a month and $255,429.71 of interest, which is $51,698.50 less than $307,128.21.
Rolling the costs in: the new loan becomes $256,000, the payment is $1,534.85 and interest is $296,545.50. The refinance comes out ahead in month 35, and lifetime savings shrink to $4,582.71.
A 15-year loan at 5.5%: the payment is $2,042.71, which is $323.17 more than now, but interest is only $117,687.31 and lifetime savings are $183,440.90.
Why one break-even number is not enough
The familiar rule divides closing costs by the monthly savings. It is a good first test, but it ignores two things. First, a refinance into a new 30-year term restarts the clock, so you owe more principal later than you would have on the old loan. Second, rolling costs into the loan spreads them over decades with interest. That is why this page also reports the month in which the refinance comes out ahead overall and the lifetime comparison.
How the term of the new loan changes the answer
A longer new term gives the lowest payment but usually the most interest over time. A shorter term, such as the 15-year example, raises the payment and can cut lifetime cost sharply. The lines labeled "over the time you have left" show what the new rate would cost if you kept the same end date, which separates the benefit of the lower rate from the effect of changing the term.
Paying closing costs in cash or rolling them in
Paying in cash needs money up front but keeps the loan smaller. Rolling the costs in needs no cash but increases the balance, the payment and the interest. Use both settings and compare the lifetime lines. Your Loan Estimate and Closing Disclosure list the real costs, and points paid for a lower rate belong in the closing costs field.
If you may move or refinance again
The "years you expect to keep the loan" field gives the net result at that date, assuming you pay off the remaining balance then. If it is negative, you would be behind at that point even if the lifetime view looks good. Selling costs and the cost of a second refinance are not included.
Assumptions and limits
- Both loans are fixed-rate with equal monthly payments. The payment shown is principal and interest only.
- Interest each month is the balance times APR / 12, rounded to the cent. The last payment clears any rounding difference.
- Closing costs and points are the single dollar amount you enter, either paid in cash at closing or added to the new loan balance.
- Not modeled: cash-out amounts, taxes, insurance, PMI, escrow, prepayment penalties, tax treatment of interest and points, rate locks and the time a lender takes to close.
- The net position assumes the balance is paid off in full at the month you stop, with no selling costs.
- The default rates and costs are example values. Use the figures on your own quote.
Frequently asked questions
How do I calculate the break-even point of a refinance?
Divide the closing costs you pay in cash by the monthly payment savings and round up. With $6,000 of costs and $220.66 saved each month, that is 28 months. This page also shows the month the refinance is ahead after counting the balance still owed.
Why is the overall break-even later than the simple one?
A lower payment can come from a longer term, which leaves a higher balance. The overall measure adds up what you have paid plus what you still owe on each loan, so it only credits the refinance once it is truly cheaper. In the example, 28 months becomes month 30.
Is it worth refinancing if my payment goes up?
It can be, if you choose a shorter term to cut interest. A 15-year loan at 5.5% in the example costs $323.17 more each month but saves $183,440.90 over the life of the loans. The right choice depends on whether you can afford the higher payment.
What happens if I roll closing costs into the loan?
The new loan is larger by the amount of the costs, so the payment and interest rise slightly and you need no cash at closing. In the example the payment goes from $1,498.88 to $1,534.85 and lifetime savings fall from $11,534.84 to $4,582.71.
Can I enter my own payment instead of the time left?
Yes. Under More options, enter the monthly principal and interest from your statement. The calculator then works out how many payments remain and ignores the years and months fields.
Does this include cash-out refinancing?
No. The new loan equals your current balance, plus closing costs if you roll them in. If you take cash out, enter the larger amount as the balance on a separate comparison and remember that the extra cash is borrowed money.