Mortgage Refinance Calculator
Should I Refinance?
Enter your current loan and the new offer to see your monthly savings, break-even point, and a personalized Should I Refinance verdict.
Current Loan
New Loan (Refinance)
Typically 2–5% of the loan. Ask your lender for a Loan Estimate.
This determines if you'll recover the closing costs before you move.
Break-Even Point
1 yr 8 mo
After 1 yr 8 mo, you start saving money
Verdict
Strong Refinance
Rate drops 1.00% — well above the 0.75% threshold. You break even in 1 yr 8 mo, and you plan to stay 7 yr. Refinancing makes clear financial sense.
Loan Comparison
Your Savings
Rate Drop Rules of Thumb
These are estimates based on your inputs.
A licensed loan officer can evaluate your credit profile, lock in your rate, and walk you through the full closing cost breakdown.
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Should I Refinance My Mortgage?
Refinancing replaces your existing mortgage with a new one — ideally at a lower interest rate or a shorter term. Done right, it can save you hundreds of dollars per month and tens of thousands of dollars over the life of the loan. But it comes with closing costs, and it only makes sense if you stay in the home long enough to recover them.
The key metric is the break-even point: how many months it takes for your monthly savings to equal your closing costs. If you plan to stay past the break-even point, refinancing puts money in your pocket. If you move before then, you lose money on the deal.
How to Use This Calculator
Step 1 — Enter your remaining balance and current loan details
Use the outstanding principal balance from your latest mortgage statement — not the original loan amount. Enter your current rate and how many years remain on the loan.
Step 2 — Enter the new loan offer
Enter the new interest rate you have been quoted and choose a new loan term. You can refinance into the same term (e.g., a new 30-year) to lower your payment, or choose a shorter term (e.g., 15-year) to pay off your home faster and save more on total interest.
Step 3 — Enter estimated closing costs
Closing costs typically run 2–5% of the loan amount and include origination fees, appraisal, title insurance, and other lender charges. Your lender is required to give you a Loan Estimate within three business days of application, which itemizes these costs exactly.
Step 4 — Choose how long you plan to stay
This is the most important and most overlooked input. If you plan to sell or move in 3 years but your break-even is 4 years, refinancing is a losing trade — even if the rate looks great on paper.
The 0.75% Rate Drop Rule
A widely used rule of thumb in mortgage banking is that a rate drop of at least 0.75 percentage points is needed to make a refinance worth the cost and hassle for most borrowers. At that level, the monthly savings are meaningful enough to recover typical closing costs within a reasonable timeline — usually 4 to 6 years on a standard loan.
That said, the rule is a starting point, not a hard cutoff. A 0.5% drop on a $500,000 loan creates much more savings than a 0.5% drop on a $100,000 loan. And if you are refinancing from a 30-year to a 15-year, the total interest savings can be enormous even if the rate barely moves. Always look at your specific numbers — that is exactly what this calculator is for.
Rate Refinance vs. Term Refinance
Rate refinance
You refinance into a new loan at a lower interest rate, typically keeping a similar term. The main benefit is a lower monthly payment. This is the most common reason people refinance, especially after rates fall significantly from when they originally bought.
Term refinance (equity play)
You refinance into a shorter term — typically from a 30-year to a 15-year — often at a similar or slightly lower rate. Your monthly payment goes up, but you pay far less in total interest and build equity much faster. This is a powerful wealth-building strategy if your income has grown and you can handle the higher payment.
Both
The best-case scenario: you get a significantly lower rate AND a shorter term. You may even be able to lower your monthly payment while dramatically cutting your total interest bill. These opportunities arise when rates drop substantially from the time you originally borrowed.
When Not to Refinance
You are close to paying off your loan
In the early years, most of your payment is interest. By the end, most is principal. Refinancing resets that clock — you start paying mostly interest again, which can cost you more long-term even if the rate is lower.
You plan to sell soon
If you will move before the break-even point, refinancing costs you money. Wait until you have a longer time horizon or until rates make the break-even much shorter.
Closing costs are unusually high
Watch out for lenders rolling closing costs into the loan balance. This increases your principal and reduces the real benefit of refinancing. Always ask for a no-cost refinance quote as a comparison.
Your credit score has dropped
If your credit has declined since you originally got your loan, you may not qualify for the rates being advertised. Check your score first — you need strong credit to get the best offers.
This calculator provides estimates for informational purposes only and does not constitute financial or lending advice. Actual savings depend on credit score, lender fees, escrow adjustments, and other loan-specific factors. Contact a licensed mortgage professional for a full refinance analysis.
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