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Should I refinance my mortgage?

Compare your current mortgage to a new loan to see if refinancing makes financial sense. Calculate your break-even point and total savings.

What This Calculator Is

A refinance calculator compares your current mortgage terms against a potential new loan to determine if refinancing makes financial sense. It calculates your monthly savings, the break-even point (how long until closing costs are recovered), and total interest savings over the loan's lifetime. This analysis prevents costly mistakes—refinancing isn't always beneficial despite lower rates.

Who This Calculator Is For

Homeowners with existing mortgages who've noticed rates have dropped, those whose credit scores have improved since their original loan, and anyone considering changing their loan term. It's also valuable for homeowners with adjustable-rate mortgages approaching their adjustment period, or those who want to eliminate PMI after building sufficient equity.

When to Use This Calculator

Use this calculator when mortgage rates drop at least 0.5-0.75% below your current rate, when your credit score has significantly improved, when you want to switch from an ARM to a fixed-rate loan, or when you're considering shortening your loan term to pay off your home faster. Also use it to evaluate if cash-out refinancing makes sense for home improvements or debt consolidation.

Current loan

years
months

New loan

By refinancing, you will:

  • •Pay $453 less each month
  • •Spend $25,025.42 less over the lifetime of the loan
  • •Break even on your upfront fees in 14 months
Current loanNew loanDifference
Loan amount$300,000.00$300,000.00$0.00
Loan term300 months360 months+60 months
Monthly payment$2,300.00$1,847.15-$452.85
Interest rate7.5%6.25%-1.25%
Total interest$390,000.00$364,974.58-$25,025.42
Total payments$690,000.00$670,974.58-$19,025.42
Upfront fees-$6,000.00-

Savings, if any, vary based on consumer credit profile, interest rate availability, and other factors.

Insights

Break-Even Analysis

With $6,000.00 in upfront costs and monthly savings of $452.85, you'll break even in 14 months (1.2 years). If you plan to stay in your home longer than this, refinancing could be beneficial.

Interest Savings Opportunity

Refinancing could save you $25,025.42 in total interest over the life of the loan. Consider locking in the lower rate if you plan to stay in your home long-term.

Default rates: Federal Reserve Economic Data (FRED), Freddie Mac Primary Mortgage Market Survey

How Refinance Is Calculated

The calculator compares your current monthly payment to what you'd pay with a new loan. It then calculates how long it takes to recoup closing costs (break-even point) and your total interest savings over the life of both loans.

Current payment/balance: if original loan details given, Payment = OrigAmt × r(1+r)^n/((1+r)^n−1); remaining balance via Balance = OrigAmt(1+r)^p − Payment×((1+r)^p−1)/r, p = payments made.
New Loan = CurrentBalance + CashOut
Upfront Fees = NewLoan × Points% + (Fees% × NewLoan or flat fee)
NewPayment = NewLoan × r(1+r)^n/((1+r)^n−1)
Break-even (months) = UpfrontFees / (CurrentPayment − NewPayment), if savings > 0
Where: r = monthly rate, n = term×12, p = payments already made.
Assumptions: Monthly compounding; fees entered as % of new loan or flat dollar amount; break-even based only on monthly P&I savings vs upfront cost, ignores tax/opportunity cost of money; total interest = payment×n − principal.

Key Takeaways

  • •A common rule: refinance if you can lower your rate by at least 0.75-1%
  • •Consider your timeline — stay long enough to pass the break-even point
  • •Shortening your term (e.g., 30 to 15 years) saves interest but raises payments
  • •Watch out for extending your loan term — you may pay more interest overall
  • •Shop multiple lenders to find the best rates and lowest closing costs

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