Refinance Calculator

Refinance calculator at a glance#

A refinance calculator compares your current loan with a new one to show whether refinancing saves money. It finds the monthly payment on each loan, subtracts the new payment from the old one to get your monthly savings, then divides the closing costs by that saving to find the break-even point, the number of months it takes for the savings to repay the cost of refinancing.

Say you owe $250,000 on a mortgage at 7% with 30 years left, and you can refinance to 5.5% over a fresh 30 years for $6,000 in closing costs. The old payment is $1,663.26 and the new payment is $1,419.47, a monthly saving of $243.78. Divide the $6,000 closing costs by $243.78 and the break-even point is about 25 months, just over two years. Stay in the home past that point and the refinance is ahead.

The table refinances the same $250,000 balance from 7% over 30 years for $6,000 in closing costs. A bigger rate drop means a larger monthly saving and a faster break-even, which is why a small rate cut rarely pays off if you plan to move soon. Resetting a loan to a fresh 30 year term lowers the payment but can add interest over the long run, so compare total interest as well as the monthly figure.

Enter your current balance, rate, and remaining term, then the new rate and closing costs, in the calculator above for your exact savings and break-even point. Real offers add fees and a new term length, so confirm the closing costs and total interest before you commit.

Finding your break-even point#

The break-even point is where refinancing starts to pay off. Divide your total closing costs by the monthly saving from the lower payment. If refinancing costs $6,000 and cuts your payment by $244 a month, you break even in about 25 months. Stay in the home past that point and you come out ahead; sell or refinance again before it and you lose money on the deal. A small rate cut produces a small monthly saving and a distant break-even, which is why it rarely makes sense if you plan to move soon.

Rate-and-term vs. cash-out refinancing#

A rate-and-term refinance replaces your loan with a new one at a different rate or length, usually to lower the payment or pay the loan off faster. A cash-out refinance takes a new loan larger than the balance you owe and pays you the difference, drawing on your home equity. A cash-in refinance is the reverse: you pay down part of the principal at closing to shrink the loan or qualify for a better rate. Cash-out usually carries a higher rate and changes how the loan is taxed, so weigh it against the cost.

Watch the loan term, not just the payment#

Resetting a 30-year mortgage to a fresh 30-year term lowers the monthly payment but can add interest over the life of the loan, because you stretch repayment out again. Refinancing a 30-year loan into a 15-year loan often raises the payment while cutting total interest sharply. Compare the total interest of the old and new loans, not just the monthly figure, so a lower payment does not hide a higher lifetime cost.

Closing costs and your credit#

Closing costs typically include application, origination, and appraisal fees, and sometimes discount points, and they are what the break-even math has to repay. Applying triggers a credit check that can dip your score briefly. Over time, lower payments and a smaller debt-to-income ratio can help your credit, but lenders look at that ratio when they approve the new loan, so a lower ratio improves your terms.

FAQ#

How do I calculate the new monthly payment after refinancing?#

Enter the new loan amount, rate, and term in the calculator above. It runs standard amortization on those inputs. Lowering the rate or extending the term reduces the payment, while a shorter term raises it.

How do I find my break-even point?#

Divide your total closing costs by the monthly saving. Costs of $4,000 with a $200 monthly saving break even in 20 months. Below that many months in the home, refinancing costs more than it saves.

When does refinancing make sense?#

When the monthly saving repays the closing costs before you plan to move or pay off the loan, and when the new total interest is not higher than what you have left. A larger rate drop reaches break-even faster.

What is the difference between cash-out and cash-in refinancing?#

Cash-out borrows more than you owe and pays you the difference from your equity. Cash-in pays down principal at closing to lower the loan amount and often secure a better rate.

How does equity affect my options?#

More equity gives you more to borrow against in a cash-out refinance and can help you qualify for better terms. Lenders cap how much of your home value you can borrow, so available equity sets the ceiling.

How does refinancing affect my credit score?#

The application credit check can lower your score by a few points temporarily. Lower payments and a reduced debt-to-income ratio can help it recover and improve over time.

What is the debt-to-income ratio and why does it matter?#

It compares your monthly debt payments to your income. A lower ratio improves your chances of approval and better rates, so lenders check it before approving a refinance.