Refinance Calculator — Break-Even & Savings

What this calculator does

A refinance offer always leads with the shiny number — the lower monthly payment. This calculator surfaces the other three numbers that decide whether the deal is actually good: the break-even point on your closing costs, the interest remaining on your current loan if you change nothing, and the lifetime cost of the new loan including the fees. Together they turn “feels cheaper” into a verified yes or no.

How the math works

The new payment uses the standard amortization formula on your current balance at the new rate and term. Then three comparisons:

Monthly savings = current payment − new payment
Break-even months = closing costs ÷ monthly savings
Lifetime savings = (interest remaining on the current loan) − (total interest on the new loan) − closing costs

The last line is the one lenders don’t print. It compares the entire remaining future of both loans, so a payment that falls while lifetime cost rises gets exposed immediately.

A worked example

Current loan: $250,000 balance at 7%, paying $1,750/month. Offer: 5.5% for 30 years with $5,000 closing costs.

New payment: $1,419.47 — monthly savings of $330.53
Break-even: 5,000 ÷ 330.53 ≈ 15 months
Staying put: about $289,000 of interest remains over roughly 25½ more years
New loan: about $261,000 of total interest over 30 years
Lifetime savings ≈ $23,000 after closing costs — and the payment drops too

This one passes both tests. But change the offer to 6.25% and the deal flips: the payment still falls by about $211 a month, yet the fresh 30-year clock means roughly $20,000 more total interest than simply keeping the current loan. Same “lower payment” pitch, opposite verdict — that sensitivity is why running your own numbers beats any rule of thumb.

Practical tips

Compare your time horizon to the break-even. Planning to move in two years? A 15-month break-even works; a 40-month one is a donation to your lender. Be honest about how long you’ll keep the loan.
Ask for a Loan Estimate from 2–3 lenders on the same day. Rates move daily, so same-day quotes are the only clean comparison. Closing costs vary between lenders far more than rates do — that variance is negotiable.
Consider matching the remaining term. If you have 23 years left, ask lenders to price a 20-year refi. You keep most of the payment relief while avoiding the restart-the-clock trap that quietly eats lifetime savings.
Keep paying the old amount after you refinance. If you can afford today’s $1,750, keep paying it on the new loan — the $330 difference becomes an automatic extra principal payment, and the loan payoff calculator will show you it cuts years off the new term.

When refinancing is the wrong tool

If your balance is small, the fixed closing costs dominate and break-even may never arrive. If your credit has deteriorated, the offered rate may not beat your current one. And if you’re deep into your loan — say year 22 of 30 — most of the remaining payments are already principal, so there’s little interest left to save. In those cases, extra principal payments (no fees, no paperwork, same guaranteed return) usually beat a refinance; model them on the mortgage calculator and compare.

Frequently asked questions

What is the break-even point and why does it matter?

Refinancing costs money up front — typically 2–6% of the loan in closing costs. The break-even point is how many months of payment savings it takes to earn that money back. If you might sell or refinance again before break-even, the refi loses money no matter how good the new rate sounds.

Why can a lower payment still cost more over the loan's life?

Because a new 30-year term restarts the clock. If you're 7 years into a 30-year loan and refinance into a fresh 30, you're stretching the remaining balance over 30 more years — often paying more total interest despite the lower rate and payment. The calculator's lifetime comparison catches this; check it, not just the monthly savings.

How much of a rate drop makes refinancing worthwhile?

The old "1% rule" is a rough shortcut; the honest answer is whatever makes your break-even comfortably shorter than your time in the home. A 0.75-point drop with low closing costs on a big balance can beat a 1.5-point drop with high costs on a small one. Run your actual numbers.

Should I roll closing costs into the new loan?

You can — it avoids cash out of pocket, but you then pay interest on the costs for the life of the loan, and the break-even math worsens. If you roll them in, add them to the balance you enter here so the comparison stays honest. "No-closing-cost" refinances bury the fee in a higher rate instead; there is always a cost somewhere.

Can I refinance to a shorter term instead?

Often the best version of the trade: refinancing a 30-year into a 15-year usually gets a meaningfully lower rate, and while the payment rises, lifetime interest plummets. Enter a 15-year term here to see the trade-off — many households near the middle of their loan find the payment increase smaller than expected.