Home Loan Refinance Calculator
A home loan refinance calculator answers the only question that matters: will refinancing actually save you money? This tool compares your current mortgage against a proposed refinance using your real remaining term, not a generic 30-year assumption. It shows your new payment, monthly savings, the break-even month, and the lifetime interest comparison, including the amortization-reset trap most calculators hide.
| Current loan | Refinanced loan | |
|---|---|---|
| Monthly payment (P&I) | ||
| Total interest | ||
| Total paid (P&I) |
Rate-drop comparison (same costs and term)
Payments are principal and interest only; taxes, insurance, and PMI are unchanged by refinancing and excluded from both sides. Assumes the new loan amount equals your current balance.
- How the calculator works
- The amortization-reset trap most calculators hide
- What we fixed in this calculator
- True break-even: why the naive number flatters the deal
- Rate-drop comparison: what each half-point is worth
- What competitors miss
- When refinancing makes sense
- Worked example, verified against the tool
- Frequently asked questions
How the calculator works
First it rebuilds your current payment from your balance, current rate, and years remaining, using the standard amortization formula: payment = balance × r(1+r)n / ((1+r)n − 1), where r is the monthly rate and n the number of payments left. Then it prices the new loan the same way with the new rate and term. Monthly savings is simply current payment minus new payment. The break-even point is closing costs divided by monthly savings. The lifetime comparison totals every remaining payment on the current loan and compares it with every payment on the new loan plus closing costs.
The amortization-reset trap most calculators hide
Here is why the years-remaining input matters. Take a $300,000 balance at 7% with 25 years left: the real payment is $2,120. Refinance to 6% on a new 30-year term and the payment drops to $1,799, saving $322 a month with a break-even of 18.7 months on $6,000 of closing costs. Looks like a clear win. But the new loan charges $347,515 in total interest versus $336,101 remaining on the current loan, because the payoff clock resets to 30 years. Over the full life of the loan you pay $17,413 more. Over a 10-year stay you still come out $32,602 ahead. Both numbers are true, and you need both to decide. This tool shows both; most competing calculators only headline the monthly savings.
What we fixed in this calculator
The previous version of this tool computed your current payment using the new loan term instead of your remaining term, which understated monthly savings by about 39% in our test case ($197.26 shown versus the correct $322). It also had no guard for a new payment higher than the current one, producing a negative break-even. The rebuilt version prices each loan on its own term, handles 0% rates, accepts $0 closing costs for no-cost refinances, and reports “never” when savings are zero or negative.
True break-even: why the naive number flatters the deal
The standard break-even (closing costs divided by monthly savings) overstates the deal because mortgage interest is tax-deductible for many borrowers. If you are in the 24% bracket, each dollar of interest saved is really worth about 76 cents after tax, so the true break-even stretches longer than the naive figure. Enter your marginal tax bracket in the optional field and the calculator shows the after-tax monthly savings and the true break-even beside the standard one. Example: $520/month in payment savings at a 32% bracket is about $353/month in real savings, moving break-even from 18.8 months to 27.7 months on $9,800 of closing costs.
Rate-drop comparison: what each half-point is worth
After your results, the tool prices four scenarios against your current loan: rate drops of 0.5, 1.0, 1.5, and 2.0 points at the same closing costs and new term. Each row shows the resulting rate, monthly savings, and break-even. Use it to answer the real question, which is not “should I refinance at 6%?” but “how much rate drop do I need before this pays off inside my timeline?”
What competitors miss
Most refinance calculators show the naive break-even and stop, which flatters every deal for borrowers who deduct mortgage interest. None of the top-ranking tools show an after-tax view, and none price multiple rate drops side by side for your specific loan: you get one scenario and must re-run the form for each alternative quote. This calculator keeps the naive break-even for comparability, adds the after-tax view, prices four rate drops in one table, and still warns you when the term reset wipes out the lifetime gain.
When refinancing makes sense
The classic rule of thumb is a rate drop of 0.75 to 1 percentage point with a break-even inside your planned stay. Beyond rate, good reasons include removing private mortgage insurance after your home value rises, switching from an adjustable rate to a fixed rate, or shortening the term: a 15-year refinance often raises the payment but slashes lifetime interest. Weak reasons include chasing a small rate drop with high closing costs, or refinancing late in the loan when most of your payment is already principal.
Worked example, verified against the tool
Balance $300,000, current rate 7%, 25 years remaining, new rate 6% on a 30-year term, closing costs $6,000, planned stay 10 years. Current payment: $2,120. New payment: $1,799. Monthly savings: $322. Break-even: 18.7 months. Interest remaining on the current loan: $336,101; interest on the new loan: $347,515. Lifetime position: $17,413 more overall, but $32,602 saved over the 10-year stay. Every figure matches the tool’s output exactly.
Frequently asked questions
How do you calculate the break-even point on a refinance?
Divide total closing costs by monthly savings. With $6,000 in costs and $322 in monthly savings, break-even is 18.7 months. If you sell or refinance again before that month, you lose money on the deal.
Should I refinance if the new payment is lower but the term is longer?
Sometimes. A longer term at a lower rate cuts the payment but restarts amortization, which can raise total interest. Compare the lifetime totals, not just the payment, and weigh them against how long you will actually stay.
What is a good rule of thumb for when to refinance?
A rate reduction of roughly 0.75 to 1 percentage point, closing costs recovered well inside your planned stay, and no plan to move soon. Smaller drops can still work with very low closing costs.
Does refinancing reset my loan term?
A standard rate-and-term refinance starts a brand-new term, usually 30 or 15 years, regardless of how many years you had left. You can ask for a custom term (for example 25 or 20 years) to avoid extending your payoff date.
Can I refinance with no closing costs?
Yes, through lender credits or rolling costs into the balance. Lender credits usually mean a slightly higher rate, and rolling costs in means paying interest on them for decades. Enter 0 for closing costs to model the payment effect, then compare the rate you are offered.
How are taxes and insurance treated in this calculator?
They are excluded from both loans. Property tax and homeowners insurance do not change when you refinance (your escrow continues), so including them would add the same amount to both sides and distort the comparison.
What credit score do I need to refinance?
Conventional refinances generally want 620 or higher, with the best rates reserved for scores around 740 and up. FHA and VA streamline refinances have more flexible requirements. Your score directly affects the new rate you are offered.
What is the “true” break-even on a refinance?
The naive break-even divides closing costs by monthly payment savings. The true break-even adjusts for taxes: because mortgage interest is deductible, after-tax savings are roughly payment savings times (1 minus your marginal tax rate), which stretches the break-even longer. This calculator shows both.
How much rate drop do I need to make refinancing worthwhile?
It depends on your balance, costs, and timeline, not on a fixed rule. The rate-drop comparison table prices 0.5 to 2.0 point drops for your loan so you can see which drop breaks even inside your planned stay.