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Formula
M = P × r(1 + r)^n ÷ ((1 + r)^n − 1); savings = M_current − M_new; break-even month = ⌈costs ÷ savings⌉
- M
- the monthly principal-and-interest payment of a loan
- P
- the loan amount (the payoff balance, plus any cash-out and any costs rolled into the new loan)
- r
- the monthly interest rate, the annual rate ÷ 12 as a decimal (6% → 0.005)
- n
- the number of monthly payments left (current loan) or in the new term
- costs
- closing costs plus discount points (1 point = 1% of the new loan amount before costs)
What the refinance calculator compares
Refinancing replaces your mortgage with a new loan: the new lender pays off the old balance, and you start a fresh schedule at a new rate and term. This refinance calculator puts the two side by side and returns:
- New monthly payment. Principal and interest on the new loan.
- Monthly savings. Your current payment minus the new one (or the increase, if it goes up).
- Break-even month. When the monthly savings have repaid the closing costs and points.
- Total interest left on each loan. What you would still pay in interest if you kept the current mortgage, against the interest on the new one.
- Lifetime savings or cost. Every remaining dollar on the current loan against every dollar on the new loan, including costs paid at closing and any cash you take out.
How to use it
- Describe the current loan. If you know the payoff balance and how long is left, choose Remaining balance and term. If you only know the original amount and term, choose Original loan details and enter how many monthly payments you have made. The calculator works out the scheduled balance for you.
- Enter your current rate, then the new rate and term from the lender’s quote.
- Add closing costs and any discount points from the Loan Estimate. For a cash-out refinance, enter the cash you want to receive.
- Tick the box if the costs will be added to the new loan instead of paid at closing.
The comparison table shows both loans in one view. Steps under the result show each figure worked out with your numbers.
How to calculate refinance savings by hand
Take a $240,000 balance at 7% with 26 years (312 payments) left, and an offer of 6% for 30 years with $5,000 in closing costs.
- Current payment: r = 0.07 ÷ 12 ≈ 0.0058333 and n = 312, so M ≈ $1,672.41.
- New payment: r = 0.06 ÷ 12 = 0.005, n = 360, (1.005)^360 ≈ 6.022575, so M = 240,000 × 0.005 × 6.022575 ÷ 5.022575 ≈ $1,438.92.
- Monthly savings: $1,672.41 − $1,438.92 ≈ $233.49.
- Break-even: $5,000 ÷ $233.49 ≈ 21.4, so the costs are recovered in month 22.
- Lifetime: the current loan has $281,791.97 of interest left; the new loan carries $278,011.65. Adding the $5,000 closing costs, the refinance ends up costing about $1,220 more over its life.
The payment drops by $233 a month, yet the refinance is slightly more expensive in total, because four extra years of payments are added. Keep the term at 26 years and the same 6% rate gives a $1,520.82 payment, a break-even in month 33 and $42,294.63 of lifetime savings. That is why the refinance calculator shows both the monthly and the lifetime view.
Break-even by rate drop
A $300,000 balance at 7% with 30 years left, refinanced into a new 30-year loan with $6,000 of closing costs. Figures come from the refinance calculator.
| New rate | New payment | Monthly savings | Break-even month | Lifetime savings |
|---|---|---|---|---|
| 6.5% | $1,896.20 | $99.70 | 61 | $29,893.23 |
| 6.25% | $1,847.15 | $148.76 | 41 | $47,552.12 |
| 6% | $1,798.65 | $197.26 | 31 | $65,012.13 |
| 5.75% | $1,750.72 | $245.19 | 25 | $82,268.01 |
| 5.5% | $1,703.37 | $292.54 | 21 | $99,314.57 |
| 5% | $1,610.46 | $385.44 | 16 | $132,759.34 |
The current payment is $1,995.91. A half-point drop needs more than five years to break even on these costs; a two-point drop pays them back in under a year and a half. There is no universal rule of thumb, which is why running your own numbers matters.
Shortening the term
Refinancing into a shorter term often raises the payment but slashes interest. Moving the $240,000 balance from 7% with 26 years left to a 15-year loan at 5.5% lifts the payment to $1,961.00, about $289 more a month, so there is no monthly break-even. Total interest, though, falls from $281,791.97 to $112,980.05, and the lifetime saving after $5,000 of costs is $163,811.92. The amortization calculator shows how fast the balance falls year by year on either loan.
Cash-out, points and rolled-in costs
- Cash-out. Borrowing an extra $30,000 on the $240,000 example at 6.5% for 30 years makes the payment $1,706.58, about $34 more than now. The lifetime figure subtracts the cash you receive, so it shows the true cost of borrowing that money against your home.
- Discount points. Paying 1 point ($2,400) to get 5.75% instead of 6% lowers the payment to $1,400.57 but pushes break-even out to month 28, because the upfront cost rises to $7,400.
- Rolled-in costs. Adding the $5,000 to the loan avoids cash at closing but raises the payment to $1,468.90 and the interest on the new loan to $283,803.56.
Common mistakes
- Judging only by the monthly payment. A lower payment from a longer term can cost more over the life of the loan.
- Using the original loan amount as the balance. After a few years you owe less, which changes both payments.
- Forgetting points and lender fees. They belong in the break-even calculation along with title, appraisal and recording costs.
- Ignoring how long you will stay. If you sell before the break-even month, the refinance loses money.
- Comparing payments that include escrow. Taxes and insurance stay the same whichever loan you have, so compare principal and interest only. The mortgage calculator adds those costs when you need the full monthly figure.
Glossary
- Payoff balance. The principal still owed on the current mortgage.
- Closing costs. Lender, appraisal, title and government fees charged to set up the new loan.
- Discount points. Prepaid interest; one point equals 1% of the loan amount, paid to lower the rate.
- Break-even month. The month when cumulative payment savings equal the upfront costs.
- Cash-out refinance. A new loan larger than the payoff balance, with the difference paid to you.
Worked examples
Rate drop on a 30-year loan
$320,000 left at 7.4% with 28 years to go, refinanced into a new 30-year loan at 6.1% with $6,500 closing costs paid in cash.
Inputs: What do you know about your current loan? = Remaining balance and term; Remaining balance = $320000; Remaining term = 28; Term unit = Years; Current interest rate = 7.4 %; New interest rate = 6.1 %; New loan term = 30; Term unit = Years; Closing costs = $6500
Current loan: $320,000.00 at 7.4% over 336 months → $2,259.73/month New loan amount = $320,000.00 balance = $320,000.00 New payment: M = P × r(1 + r)^n ÷ ((1 + r)^n − 1), r = 6.1% ÷ 12, n = 360 → $1,939.18 Monthly savings = $2,259.73 − $1,939.18 = $320.55 Break-even = $6,500.00 ÷ $320.55 → month 21 Lifetime = $759,267.66 left to pay now − ($698,105.99 new payments + $6,500.00 paid at closing) = $54,661.67
Answer: Refinancing $320,000.00 from 7.4% to 6.1% over 30 years: new payment $1,939.18/month ($320.55 a month less than your current $2,259.73); break-even month 21 (1 year 9 months); lifetime savings $54,661.67.
From the original loan, into a 15-year term
A $250,000, 30-year loan at 6.75% after 60 payments, refinanced to a 15-year loan at 5.6% with $4,200 closing costs and 1 point.
Inputs: What do you know about your current loan? = Original loan details; Original loan amount = $250000; Original term = 30; Term unit = Years; Monthly payments already made = 60; Current interest rate = 6.75 %; New interest rate = 5.6 %; New loan term = 15; Term unit = Years; Closing costs = $4200; Discount points = 1 %
Current loan: $234,689.27 at 6.75% over 300 months → $1,621.50/month New loan amount = $234,689.27 balance = $234,689.27 New payment: M = P × r(1 + r)^n ÷ ((1 + r)^n − 1), r = 5.6% ÷ 12, n = 180 → $1,930.08 Monthly savings = $1,621.50 − $1,930.08 = −$308.58 Lifetime = $486,448.57 left to pay now − ($347,415.08 new payments + $6,546.89 paid at closing) = $132,486.60
Answer: Refinancing $234,689.27 from 6.75% to 5.6% over 15 years: new payment $1,930.08/month ($308.58 a month more than your current $1,621.50); break-even none: the monthly payment does not fall; lifetime savings $132,486.60.
Cash-out refinance with costs rolled in
Edge case: $180,000 left at 5.9% for 22 years; borrowing $40,000 cash-out at a higher 6.4% for 30 years with $5,000 costs added to the loan, so the payment rises.
Inputs: What do you know about your current loan? = Remaining balance and term; Remaining balance = $180000; Remaining term = 22; Term unit = Years; Current interest rate = 5.9 %; New interest rate = 6.4 %; New loan term = 30; Term unit = Years; Closing costs = $5000; Cash-out amount = $40000; Roll closing costs and points into the new loan = Yes
Current loan: $180,000.00 at 5.9% over 264 months → $1,218.92/month New loan amount = $180,000.00 balance + $40,000.00 cash-out + $5,000.00 costs rolled in = $225,000.00 New payment: M = P × r(1 + r)^n ÷ ((1 + r)^n − 1), r = 6.4% ÷ 12, n = 360 → $1,407.39 Monthly savings = $1,218.92 − $1,407.39 = −$188.47 Lifetime = $321,794.83 left to pay now − ($506,659.79 new payments − $40,000.00 cash received) = −$144,864.96
Answer: Refinancing $180,000.00 from 5.9% to 6.4% over 30 years: new payment $1,407.39/month ($188.47 a month more than your current $1,218.92); break-even none: the monthly payment does not fall; lifetime extra cost $144,864.96.
Assumptions and limitations
- Both loans are fixed-rate, repaid monthly, with the monthly rate equal to the annual rate ÷ 12. Payments are principal and interest only; property tax, homeowners insurance, mortgage insurance and HOA dues are not included.
- With original loan details, the remaining balance is the scheduled balance after the payments you have made, assuming every payment was on time and no extra principal was paid. Your servicer's payoff figure may differ slightly.
- Discount points are a percentage of the new loan amount before costs (balance + cash-out). Rolled-in costs are added to the new loan and accrue interest; otherwise they are paid in cash at closing.
- Break-even month = closing costs and points ÷ monthly payment savings, rounded up. It ignores interest you could earn on the cash and the difference in equity between the two loans.
- Lifetime savings = remaining payments on the current loan − (all new-loan payments + costs paid at closing − cash-out received). A negative figure is shown as a lifetime extra cost. No discounting for inflation or investment returns.
- Monthly savings are the difference between the two payments rounded to the cent; totals use the unrounded schedule. Prepayment penalties, tax effects and rate locks are not modeled. This is an estimate, not financial advice; your lender's Loan Estimate gives the binding figures.
Frequently asked questions
How do you calculate the break-even point on a refinance?
Divide the total cost of refinancing (closing costs plus points) by the monthly payment savings, then round up to the next whole month. With $4,500 of costs and $180 a month in savings, 4,500 ÷ 180 = 25, so you break even in month 25. If you expect to sell or refinance again before then, the refinance probably costs more than it saves.
How do you calculate if a refinance is worth it?
Check two numbers, not one. The break-even month tells you how long you must keep the loan for the upfront costs to pay off. The lifetime savings tell you whether the new loan costs less in total, which is not guaranteed when you restart a 30-year term. A refinance is usually worth it when you will keep the loan well past break-even and the lifetime figure is positive.
Why does a lower payment still show a lifetime extra cost?
Because the new loan may stretch your repayment over more years. Refinancing 26 years of payments into a new 30-year loan adds four years of interest, and that can outweigh a lower rate. Try a new term equal to your remaining term to see the pure effect of the rate change.
How do you calculate a cash-out refinance?
Add the cash you want to take out to your payoff balance to get the new loan amount, then work out the payment on that larger amount at the new rate and term. Enter the cash-out amount in the calculator. Its lifetime figure subtracts the cash you receive, so it shows the cost of borrowing that money through your mortgage.
Should I roll closing costs into the new loan?
Rolling costs in means nothing to pay at closing, but you pay interest on those costs for the whole term. On a $240,000 refinance at 6% for 30 years, rolling in $5,000 raises the payment by about $30 a month and adds roughly $5,800 of interest. Tick the roll-in box to compare both ways.
Are discount points worth paying?
One point costs 1% of the loan amount and lowers the rate by an amount the lender sets. Points pay off only if you keep the loan long enough for the lower payment to recover their cost, the same break-even idea as closing costs. Enter the points and the lower rate the lender quotes to see the new break-even month.
How is a refinance mortgage payment calculated?
It uses the standard amortization formula, M = P × r(1 + r)^n ÷ ((1 + r)^n − 1), where P is the new loan amount, r is the annual rate ÷ 12 and n is the number of monthly payments. The calculator applies the same formula to your current balance and remaining term so both payments are compared like for like.
Sources
- A Consumer's Guide to Mortgage Refinancings — Board of Governors of the Federal Reserve System. Checked October 10, 2026.
- How should I use lender credits and points (also called discount points)? — Consumer Financial Protection Bureau. Checked October 10, 2026.
- Data Spotlight: Trends in discount points amid rising interest rates — Consumer Financial Protection Bureau. Checked October 10, 2026.