Refinance Calculator
Determine if refinancing your mortgage makes sense by comparing old and new payments, monthly savings, and how long it takes to break even on closing costs.
Results
Visualization
How It Works
Refinancing replaces your current mortgage with a new one, ideally at a lower interest rate. The key question is whether the monthly savings justify the upfront closing costs. The break-even point tells you how many months of savings it takes to recoup those costs — if you plan to keep the property longer than that, refinancing makes financial sense.
The Formula
Variables
- Current Balance — Remaining principal on your existing mortgage
- Current Rate — Interest rate on your existing mortgage
- New Rate — Interest rate offered on the refinanced mortgage
- Closing Costs — Fees to process the new loan — typically 2-3% of the loan amount
- Break-Even — Number of months until cumulative savings exceed closing costs
Worked Example
You owe $250,000 at 8% with a $1,834 monthly payment. A lender offers 6.5% for 30 years with $5,000 closing costs. New payment = $1,580. Monthly savings = $254. Break-even = $5,000 / $254 = 20 months. If you keep the property more than 20 months, the refinance pays for itself. Over 30 years, you save about $86,400.
Practical Tips
- The general rule is to refinance if you can reduce your rate by at least 0.75-1% and plan to stay 3+ years.
- A shorter loan term (15 vs 30 years) raises payments but can save six figures in interest.
- Watch out for prepayment penalties on your current mortgage — they can erase refinance savings.
- Cash-out refinancing lets you tap equity but increases your loan balance and risk.
- Lock your rate as soon as you find a good offer — rates can change daily.
Frequently Asked Questions
When does it make sense to refinance?
Refinance when the monthly savings justify the closing costs within your planned holding period. If your break-even point is 20 months and you will keep the property for 5+ years, it is a clear win.
How much does it cost to refinance?
Typical refinance closing costs are 2-3% of the loan amount. On a $250,000 loan, expect $5,000-$7,500 in fees including appraisal, origination, title, and recording.
Can I refinance an investment property?
Yes, but rates and requirements are stricter than for primary residences. Expect rates 0.5-0.75% higher and a requirement of 25%+ equity. The savings must be larger to justify the higher costs.
Should I refinance to a shorter term?
If you can afford the higher payment, refinancing from 30 to 15 years dramatically reduces total interest. But it hurts cash flow, which matters for rental properties. Run the numbers both ways.
What is a no-closing-cost refinance?
The lender waives upfront fees but charges a slightly higher interest rate to compensate. You break even immediately but pay more over the life of the loan. Good if you are not sure how long you will keep the property.