Refinance
Calculator

Start by entering your current loan details: the remaining balance on your mortgage, the interest rate you are currently paying and how many years you have left on the loan. These figures determine your existing monthly payment and the total interest you will pay if you keep the loan as-is.

Next, enter the terms for your proposed new loan. Set the new interest rate your lender has offered, choose a new term length and enter the estimated closing costs. Closing costs typically include appraisal fees, title insurance, origination charges and recording fees.

The calculator uses a standard amortization formula to compute both your current monthly payment and the new monthly payment. It then subtracts the new payment from the old one to show your monthly savings. The break-even point tells you how many months of savings it takes to recoup the closing costs you paid upfront.

Finally, it calculates total interest paid under both scenarios and subtracts closing costs from the interest saved to give you a true net savings figure. If the net savings is positive and the break-even period is shorter than the time you plan to stay in your home, refinancing is likely a smart financial move.

When to refinance. The traditional rule of thumb is to refinance when you can lower your interest rate by at least 0.5 to 1 percentage point. However, the real answer depends on your break-even timeline. If you plan to stay in your home for several more years and the monthly savings are meaningful, even a smaller rate drop can be worthwhile.

Closing costs. Expect to pay between 2% and 5% of your loan amount in closing costs. On a $250,000 refinance, that could mean $5,000 to $12,500. Some lenders offer "no-closing-cost" refinances, but they typically roll the costs into the loan balance or charge a higher rate to compensate.

Break-even analysis. This is the most important number in any refinance decision. Divide your total closing costs by your monthly savings to find out how many months it takes to break even. If you sell or move before reaching that point, you lose money on the deal. A break-even point under 24 months is generally considered excellent.

Rate-and-term vs. cash-out. A rate-and-term refinance simply replaces your current mortgage with one that has better terms. A cash-out refinance lets you borrow more than your current balance and take the difference as cash for home improvements, debt consolidation or other needs. Cash-out refinances typically carry slightly higher interest rates.

Term length matters. Refinancing from a 30-year loan into a 15-year loan usually means a higher monthly payment, but you will pay dramatically less in total interest. Conversely, refinancing into a longer term lowers your monthly payment but increases the total cost of the loan. Always compare the total interest under each scenario.