Mortgage Refinance Calculator — Savings, Costs & Break-Even

Refinance savings over time

A refinance does not deliver its value on the day it closes — it delivers it slowly, one payment at a time, after you have already paid for it. That is why the honest way to look at a refinance is a curve rather than a single number. It starts below zero by whatever the deal cost you, climbs as the cheaper payments accumulate, and crosses zero at the break-even month. Where you actually are on that curve when you sell, move or refinance again is the only thing that decides whether it was worth doing.

The curve on this page counts two things at once: every dollar that leaves your bank account, and every dollar you still owe. That second part is what a payment-only comparison misses. Two loans with identical payments are not equivalent if one of them will be paid off nine years sooner, and a refinance that lowers your bill by stretching the balance back out is quietly converting equity into cash flow. The chart shows both offers against the same zero line, marks each break-even, and marks the point where your own horizon falls.

Should you refinance?

There is no rate-drop rule that answers this, and the popular ones are actively misleading. "Refinance when rates fall a full point" ignores the size of your balance, the costs you are being charged and how long you will keep the loan — a quarter-point on a $700,000 balance can pay for itself in months, while two full points on a $90,000 balance with $6,000 of costs may never recover. The question is arithmetic, and it has three inputs: what the new loan changes about what you pay, what it costs to get, and how long you hold it.

Set the horizon to the truth rather than to the loan term. Most people do not keep a 30-year mortgage for 30 years; they sell, relocate or refinance again. If you genuinely do not know, run the comparison at three years, five years and life, and see whether the answer changes sign. When it does, the decision is really a bet on how long you stay — and the tool will tell you exactly which month the bet turns.

Refinance break-even explained

The familiar formula divides closing costs by monthly savings. It is a reasonable first approximation and it is wrong in three common situations: when the new term differs from your remaining term, when mortgage insurance ends on one side and not the other, and when any of the costs are financed rather than paid. In all three the monthly saving is not constant and the balances diverge, so a single division cannot describe it.

This page reports two break-evens instead, both computed from the full schedules. The cash-flow break-even is the first month your accumulated payment savings equal the economic transaction costs — the practical answer to "when do I have my money back?". The equity-adjusted break-even is the first month your total position, including the balance still outstanding on each loan, is no worse than doing nothing. On a like-for-like refinance the two land close together. On a term reset they can be years apart, and the equity-adjusted one sometimes never arrives at all — which is precisely the case a payment-only calculator reports as a win.

Lower payment vs lower total cost

These are different goals and they frequently point in opposite directions. Lowering the payment is about monthly cash flow, and the most powerful lever for it is time: spread any balance over more months and each one gets smaller, regardless of the rate. Lowering total cost is about interest, and the levers there are the rate and the speed of repayment. A refinance that resets a partly repaid 30-year mortgage back to a fresh 30 years is buying cash flow with time, and paying for it in interest.

Neither goal is wrong. If a lower payment is what you need — because income dropped, or because the money has a better use — buying it deliberately with a term extension is a legitimate decision. What the tool insists on is that you see the price. The payment-change decomposition splits your saving into the part the rate bought and the part the calendar bought, and the "cost of resetting the clock" section prices the years you added.

Refinance closing costs

Not everything on a Closing Disclosure is a cost of refinancing. The CFPB's Loan Estimate already draws the line this calculator uses. Loan Costs — origination charges, discount points and the services you are billed for, such as appraisal, title and settlement — are money genuinely consumed to do the deal, offset by any lender credit. Those are what a break-even has to recover.

Prepaid interest and the initial escrow deposit are different. Prepaid interest covers the days between closing and your first payment — you would have paid interest for those days on the old loan too. The escrow deposit funds an account that is still your money, and your old servicer normally refunds the balance of the account you already had. Treating either as a cost of refinancing inflates the break-even, sometimes by months. This calculator keeps them in their own bucket, includes them in the cash you need at the table, and leaves them out of the economic break-even.

Pay closing costs or finance them?

Paying in cash costs you the money now and leaves the new loan at your payoff balance. Financing rolls the charges into the principal, so you keep the cash and borrow the costs — at the mortgage rate, for the whole term. Financing is never cheaper in total: you are paying interest on the fees. But "never cheaper" is not the same as "always wrong", because the cash may be worth more to you as an emergency buffer or against higher-rate debt.

The model keeps the two paths strictly separate so neither is double-counted. Cash costs enter the initial cash flow and never touch the principal; financed costs raise the new balance by exactly the amount rolled in, and their future cost emerges naturally through the payment, the interest and the balance you still owe. Switch between them on the same quote and the difference you see is exactly the interest on the financed slice — nothing else moves.

What is a no-closing-cost refinance?

It is a refinance where the lender pays your closing costs with a lender credit, and recovers that credit by charging you a higher interest rate. Nothing is waived; the cost simply moves from a cheque at closing into every payment for as long as you keep the loan. That trade can be excellent if you expect to move or refinance again soon, and expensive if you keep the mortgage for twenty years.

Evaluating one honestly requires the actual quote — its actual rate and its actual credit — because there is no fixed exchange rate between credits and rate. It varies by lender, by day and by loan. This calculator therefore never derives a "no-cost equivalent" rate for you: enter the real no-cost quote as one offer, the real lower-rate-with-costs quote as another, and read the month at which one overtakes the other.

Points vs lender credits

They are the same trade run in opposite directions. Discount points are money you pay at closing to get a lower rate; lender credits are money the lender pays toward your closing costs in exchange for a higher rate. On a Loan Estimate points appear as a charge in the Loan Costs section and credits appear as a negative number in the same area.

This calculator prices points as the dollars they cost — either a dollar figure or a percentage of the loan amount — and uses the rate the quote actually carries. It deliberately does not convert points into a rate reduction, and it does not assume that one point buys a quarter of a percentage point: the real exchange varies, and inventing a conversion would produce a confident number describing a loan nobody offered you. To decide whether points are worth buying, enter both quotes and read the offer-to-offer break-even, which is the month the points have paid for themselves.

Refinance vs extra principal payment

If you have a few thousand dollars available and a mortgage you would like to cost less, refinancing is not the only option — and it is not automatically the better one. Putting the same cash directly onto the principal saves interest immediately, with no transaction costs, no new term, no underwriting and no commitment. It does not lower your monthly payment; it shortens the loan.

The tool models this head to head: it takes the cash you would have handed over at closing, applies it to your current principal, and reports the resulting payoff date, interest saved and balance at your horizon next to the refinance offer. When a refinance is genuinely good the comparison confirms it comfortably. When it is marginal, prepaying often wins — and that is worth knowing before you sign anything.

Cash-out refinance

A cash-out refinance replaces your mortgage with a larger one and hands you the difference. Two decisions are bundled together: whether to change the terms of your existing debt, and whether to borrow more against your home. They deserve to be evaluated separately, because a bad refinance can look attractive when a large cheque is sitting in the same total.

This calculator never counts the proceeds as a saving. The cash-out is added to the new loan amount, reported on its own line as cash received, and priced: you see the extra monthly payment it causes, the extra interest through your horizon and over the life of the loan, and what the identical offer would look like without it. Whether the money is worth borrowing depends on what you do with it, at what rate, and with your home as collateral — questions this tool does not answer for you.

15-year vs 30-year refinance

A 15-year refinance raises the payment substantially and cuts total interest sharply, and 15-year market rates normally price below 30-year rates, which widens the advantage further. The trade is not only financial: the higher payment is contractual, and it will still be due in a year when circumstances have changed. A 30-year loan you voluntarily prepay on a 15-year schedule reaches most of the same place with the option to stop.

Enter both as separate offers with their real quoted rates — not the same rate on two terms, which would understate the shorter loan — and compare the net benefit at your horizon, the payoff dates and the remaining interest side by side. The extra-principal tab shows what the flexible version of the same plan achieves.

How the calculator works

Enter your current balance, note rate and remaining term, then the rate, term and costs from a real quote. The engine builds a complete month-by-month amortization schedule for both loans using the same tested mortgage code that powers the Mortgage Calculator, overlays mortgage insurance independently on each side, and tracks two running totals: everything you have paid, and everything you still owe.

The net benefit at any month is the difference in what you have paid plus the difference in what you owe. Because both halves are present, the model cannot be fooled by a lower payment that comes from a longer term, and comparing a scenario against itself returns exactly zero at every horizon — which is one of the tests that runs on every build. Costs are sorted into disjoint buckets before any of this, so the economic break-even is charged only with what refinancing genuinely costs, and financed charges show up in the balance rather than in the cash flow.

Everything runs in your browser. No figure you type is sent anywhere, no network request is needed to compute a result, and the optional share link puts your inputs in the URL fragment, which browsers never transmit.

Formulas

The scheduled payment on a fixed-rate loan uses the standard amortization formula, always with the note rate and never the APR:

M = P · r / (1 − (1 + r)−n), where P is the loan amount, r is the note rate divided by twelve and n is the number of monthly payments. At a rate of exactly zero the payment is P / n.

The primary decision metric is the net benefit at month t:

NetBenefit(t) = CumulativeOutflowcurrent(t) − CumulativeOutflowrefinance(t) + Balancecurrent(t) − Balancerefinance(t)

Cumulative outflow counts every scheduled payment, every mortgage-insurance premium and the cash paid at closing. The cash-flow break-even is the first month at which cumulative payment savings reach the economic transaction costs; the equity-adjusted break-even is the first month at which NetBenefit(t) ≥ 0. The payment change decomposes as ΔM = principal effect + rate effect + term-reset effect, each step changing exactly one variable, so the three always reconcile with the total.

Costs classify as: economic = points + origination + other loan costs − lender credits; timing = prepaid interest + initial escrow − expected old escrow refund; cash at closing = (economic + timing) − financed; and new loan amount = base + financed + cash-out.

Worked examples

Every figure below is computed by the same engine that powers the calculator, at build time, from the inputs shown. None of it is typed into this page, so an example cannot drift away from the tool.

Assumptions & limitations

• Both the current mortgage and every refinance offer are fixed-rate and fully amortizing, with monthly payments made on time.
• The new base loan amount equals your current payoff balance unless you override it; anything financed or taken as cash is added on top.
• Property taxes, homeowners insurance and HOA dues are assumed unchanged by the refinance, so they are excluded from every comparison rather than counted as savings.
• Mortgage insurance is charged at the monthly amount you enter, up to the end month you enter, independently on each side.
• Points are the dollars your quote charges for them; the note rate used is always the rate you entered, never one derived from the points.
• Cash-out proceeds are borrowed money: they are reported separately and never counted as a benefit.
• The horizon is how long you expect to keep the mortgage — sale, move or another refinance all end it.
• Educational estimate, not a loan offer, rate lock, underwriting decision, eligibility or approval assessment.
• Tax effects are not modeled in V1. Whether mortgage interest and points are deductible, and what they are worth, depends on taxpayer-specific IRS rules — itemizing versus the standard deduction, acquisition-debt limits, how cash-out proceeds are used, and the requirement that points on a refinance generally be deducted rateably over the term rather than in the year paid. A single marginal rate cannot stand in for that, and applying one would make the headline look more precise than it is.
• Adjustable-rate resets, interest-only periods, balloon structures and reverse mortgages are not modeled.
• FHA Streamline, VA IRRRL and USDA refinance programs have their own fees, insurance rules and eligibility tests that this tool deliberately does not model.
• Closing-cost figures come from your quote or Loan Estimate; the tool does not estimate what a lender will charge you.
• Appreciation, depreciation and any change in property value are outside the model — the comparison is between two loans, not two housing outcomes.

Tax effects are deliberately not modeled in V1. Whether mortgage interest and points reduce your tax, and by how much, depends on facts this calculator does not know and should not guess: whether you itemize at all, the acquisition-debt limits that apply to your loan, how any cash-out proceeds are used, and the rule that points paid on a refinance are generally deducted rateably over the term of the loan rather than in the year you pay them. Multiplying a saving by a marginal rate would make the headline look more precise while making it less true. The IRS guidance is linked in the sources below; a tax adviser can tell you what your own position is.