A mortgage refinance calculator compares your current loan to a proposed new loan, and tells you three things that matter: the new monthly payment, the break-even month (when monthly savings have repaid the closing costs), and the lifetime savings net of those closing costs. Enter the balance still owed, your current rate and years remaining, the new rate and term, and the closing costs the lender quoted.
If you want a standard purchase mortgage, use the Mortgage Calculator; this page is for the refi decision specifically. The classic trap this tool exposes: a lower rate on a longer-than-remaining term often shows monthly savings but costs more over the life of the loan, because you're paying interest for more months than you would have on the old loan.
Key takeaway
A refinance is two trades wrapped in one: a rate trade (lower interest cost on the remaining principal) and often a term trade (resetting to a new 30-year clock). Monthly savings come from both trades; lifetime savings come almost entirely from the rate trade. The only honest measure of "did the refi save me money" is lifetime savings net of closing costs, the headline monthly drop can hide a larger lifetime cost when the term resets.
How it's calculated
Both monthly payments come from the standard amortization formula:
M = P × r(1+r)^n / ((1+r)^n − 1)
where P is the loan balance, r is the monthly rate (annual ÷ 12 ÷ 100), and n is the number of monthly payments.
The current payment uses your remaining-balance and remaining-years; the new payment uses the same balance with the new rate and the new term. Subtract for monthly savings. Divide closing costs by monthly savings for break-even months, the month at which the cumulative savings first cover what you paid to refinance.
Lifetime savings (net) is the most important number:
lifetime = (M_current × n_current) − (M_new × n_new) − closing_costs
A positive number means refinancing saves money over the full life of the loan. A negative number means the rate trade was real but the term reset (more months of interest) wiped it out, and you'd be better off keeping the current loan or refinancing into a shorter term.
Source: Standard fixed-rate amortization formula applied to current and proposed loans
Examples
$250K balance, 6.5%/25 yr → 5.5%/30 yr, $5K closing
- Current loan balance $250,000
- Current interest rate 6.5%
- Years remaining on current loan 25 yr
- New interest rate 5.5%
- New loan term 30 yr
- Closing costs $5,000
Refinancing $250,000 at 6.5% with 25 years remaining into a fresh 5.5%/30-year drops the monthly payment from about $1,688 to $1,420, savings of roughly $268/month, with a break-even at month 19. But the lifetime number is negative: stretching the term by 5 years adds enough interest to overwhelm the rate cut, and the full 30-year payments plus closing costs leave you ~$10K worse off than just paying off the current loan. The headline "lower payment" hides a costlier loan.
$300K balance, 7.5%/28 yr → 5.75%/28 yr, $4.5K closing
- Current loan balance $300,000
- Current interest rate 7.5%
- Years remaining on current loan 28 yr
- New interest rate 5.75%
- New loan term 28 yr
- Closing costs $4,500
Same remaining term (28 years) on both loans isolates the rate trade. Dropping from 7.5% to 5.75% on a $300K balance saves about $340/month, breaks even at month 14, and produces roughly $109,000 in lifetime savings net of closing costs. This is the ideal refinance shape, meaningful rate drop, term not extended, break-even well under three years.
Frequently asked questions
How do I know if my refinance is actually saving me money?
Look at lifetime savings net of closing costs, not the monthly payment drop. If the new loan's term is longer than the years remaining on your current loan, you can have a lower monthly payment and still pay more total interest over the life of the loan, because you're paying for more months. The only question that matters is (current_payment × current_months) − (new_payment × new_months) − closing_costs. If that's positive, the refi saves real money. If it's negative, you're paying more in exchange for short-term cash flow relief.
What's a typical break-even period for a refinance?
Most lender-recommended refinances target a break-even of 2–3 years, sometimes up to 5 if the rate cut is large. Below 1 year is rare and usually means the rate drop is exceptional or closing costs were rolled into the loan (not actually saved). Above 5 years, the math gets fragile, life events (move, sell, another refi) cut short the period over which monthly savings accumulate, and you might never recoup the closing costs in practice.
Should I roll the closing costs into the new loan balance?
It's a financing trade-off: instead of paying $5,000 cash at closing, you add $5,000 to the new principal and pay interest on it for 30 years. The break-even date moves out by a few months and lifetime savings drop. Mathematically, paying cash up-front is cheaper. Practically, rolling the costs in is fine if the cash is tight, just understand that "no-cost refi" usually means the costs are buried in the rate (slightly higher) or the balance (slightly bigger), not eliminated.
Does this calculator include taxes, insurance, and PMI?
No, both payments are principal-and-interest only. Taxes, homeowners insurance, and PMI typically don't change much from a refinance (PMI may drop if the new appraisal pushes you below 80% LTV, but that's separate from the rate decision). The difference between the current and new P&I payment is the real monthly impact of the refi itself; everything else is escrow bookkeeping and stays roughly constant.
How is this different from a standard mortgage calculator?
A mortgage calculator prices a single loan: payment, total interest, amortization. A refinance calculator prices two loans against each other, the one you have versus the one a lender is offering, and adds the closing-cost transaction on top. The decision metric here is break-even and lifetime savings, not absolute monthly payment. For a purchase or first-time mortgage shopping, use the standard tool; for a refi-vs-keep decision, use this one.