Refinance Calculator

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.

Common mistakes

1. Judging the deal by the payment drop alone. A lower monthly payment can still mean more total interest if the new loan restarts a full 30-year term — check the lifetime comparison, not just the payment line.
2. Ignoring how long you’ll actually keep the loan. If you might move or refinance again before the break-even month, the closing costs are never recovered no matter how attractive the rate looks.
3. Rolling closing costs into the balance without adding them to the math. Financing the fees means paying interest on them for the life of the loan — leave them out of the entered balance and the break-even calculation understates the true cost.
4. Refinancing deep into an existing loan without checking the interest left. Late in a mortgage’s term, most of the remaining payments are already principal — there may be little interest left to save, making extra principal payments a better tool than a refinance.

Practical tips

1. 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.
2. 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.
3. 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.
4. 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 amortization calculator and compare.