How to use the Refinance calculator
- Enter your numbers. Fill in current loan balance, current rate, years remaining, new rate, new term, closing costs.
- Read your results. Results update instantly. The headline shows the monthly savings; the breakdown and table below show the details.
How to tell if refinancing is worth it
The key number is the break-even point: closing costs divided by monthly savings. If you’ll stay in the home longer than that, refinancing likely makes sense. Also look at lifetime interest. Resetting a 28-year remaining balance to a new 30-year loan lowers the payment but can increase total interest.
The formula
Both payments use the standard amortization formula on your current balance.
where M is the monthly payment, P the amount borrowed, r the monthly interest rate (APR ÷ 12) and n the number of monthly payments. Each month, interest is charged on the remaining balance and the rest of the payment reduces principal, so early payments are mostly interest and later payments are mostly principal.
Worked example
With these inputs: current loan balance$300,000; current rate7.5%; years remaining28; new rate6.125%; new term30y; closing costs$6,000.
The calculator gives a monthly savings of $315.77 (break even in 1 yr 8 mo). Other results: current payment (p&i)$2,138.60, new payment (p&i)$1,822.83, break-even1 yr 8 mo, lifetime interest saved (after costs)$56,351.
What your results mean
The break-even point is the number of months until your monthly savings repay the closing costs. If you plan to stay in the home longer than that, refinancing usually pays off. Also check lifetime interest, since restarting a 30-year term can cost more overall.
Tips
- Compare the remaining term of your current loan with the new term, not just the payments.
- Ask about no-closing-cost options, but check the higher rate that usually comes with them.
- Your credit score and equity drive the rate you’re offered.
Frequently asked questions
When is it worth refinancing?
When you can lower your rate enough that monthly savings repay closing costs well before you expect to sell or refinance again.
How much does it cost to refinance?
Closing costs commonly run about 2–6% of the loan amount, including lender fees, appraisal and title. Your Loan Estimate lists them.
How much do closing costs run?
Typically 2%–6% of the loan amount.
Is a 1% rate drop required?
No. It depends on your balance, costs and how long you’ll stay. Use the break-even.
Should I refinance to a 15-year loan?
If you can afford the higher payment, it usually saves the most interest.
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