Refinance Calculator
What is a Refinance Calculator?
Refinancing means replacing your current mortgage with a new one, usually to get a lower interest rate or change your loan term. A refinance calculator compares your existing payment with the new one and tells you whether the switch is worth the closing costs.
The default case shows the full picture. A borrower owes $280,000 at 7% with 25 years left - a payment of about $1,979. Refinancing to 5.5% over a new 30-year term drops the payment to roughly $1,590, saving about $389 every month. Against $6,000 in closing costs, break-even arrives in 16 months. Interest to payoff tells the rest of the story: the current loan would cost about $593,700 in future interest versus roughly $572,300 under the refinance, a saving of about $21,400 - real money, though less than the monthly saving suggests, because the new term adds five more years of payments.
You will need numbers from both loans. Describe your current mortgage - balance, rate, years remaining - then the candidate loan: new rate, new term, and estimated closing costs, which typically run 2-5% of the balance. The calculator prices both payments with the same amortization formula on your remaining balance, then reports the monthly difference, the total interest under each scenario, and the break-even point: closing costs divided by monthly savings, in months. That break-even figure is the decision line between refinancing and standing pat.
Rate shoppers, term-shorteners and anyone weighing a cash-out will get usable answers here - though cash-out raises the balance, so model it by adjusting the loan amount input. The calculator assumes both loans run to payoff with no extra payments, no escrow changes and no PMI shifts, and it prices rate-and-term refinancing only: property taxes, insurance and HOA dues continue unchanged either way. Closing cost estimates deserve care - ask a lender for a formal Loan Estimate before committing, and remember that rolling costs into the new balance raises both the payment and the interest figures slightly.
Frequently Asked Questions
When does it make sense to refinance?
Refinancing usually makes sense when the new rate is at least 1% lower than your current one and you plan to stay in the home long enough to recoup closing costs. Use the break-even calculation: divide total closing costs by your monthly savings to find the months needed.
How is the monthly savings calculated?
The calculator compares your current monthly payment with the new one on the same remaining balance. Monthly savings = current payment - new payment. A longer new term can lower the payment even with the same rate, but it also extends how long you owe.
What are refinance closing costs?
Typical refinance closing costs range from 2% to 5% of the loan and include origination fees, appraisal, title search, and recording fees. Including them in the calculator is essential for an accurate break-even figure.
Is refinancing worth it for a 1% rate drop?
Often, but the break-even math decides rather than the headline number. A full percentage point on a large balance generates substantial monthly savings, so it works for big loans held long enough to pass break-even. On small balances or short stays, even a 1% drop may never pay back its closing costs.
Does refinancing restart my loan?
A new term starts fresh at the length you choose, which is why many refinancers move from 25 years remaining back to 30 - lower payment, but more total years in debt. Choosing a new term equal to your remaining years, or shorter, keeps the payoff date from drifting while still capturing the rate savings.
What credit score do I need to refinance?
Most lenders want roughly 620 or better for conventional refinances, with the best pricing reserved for scores of 740 and above. FHA and VA programs can go lower. Your equity matters too - refinancing above 80% loan-to-value usually adds PMI or higher pricing.