Refinance Calculator

Refinance Calculator Explained

This refinance calculator helps you compare your current loan with a new refinance offer. It shows the new monthly payment, total interest, and how long it takes to recover closing costs (the breakeven point).

What refinancing actually does

When you refinance, you replace your existing loan with a new one – usually with a different interest rate, term, or both. The goal is usually to:

• Lower the monthly payment
• Reduce the interest rate
• Change the loan term (shorter or longer)
• Remove or add a co-borrower

However, refinancing also comes with closing costs, which is why the breakeven point is so important.

How this refinance calculator works

The calculator compares two scenarios:

1. Your current loan: balance, remaining term and interest rate
2. Your new loan: same balance, new interest rate and term, plus closing costs

For each, it estimates:

• Monthly payment
• Total interest paid over the remaining term
• Difference in monthly payment
• Total interest savings (or loss)
• Breakeven point to recover closing costs

Example refinance scenario

• Current balance: $280,000
• Current APR: 6.75%
• Remaining term: 25 years
• New APR: 5.25%
• New term: 25 years
• Closing costs: $4,000

Results might look something like:

• Current monthly payment: higher
• New monthly payment: lower
• Monthly savings: maybe $200–$250
• Interest savings over life of loan: tens of thousands of dollars
• Breakeven time: roughly 16–20 months (to recover $4,000 closing costs)

If you plan to stay in the home longer than the breakeven period, the refinance is more likely to be worth it.

Breakeven point: the key refinance number

The breakeven point answers one question:

“How many months of lower monthly payments do I need before the savings exceed the closing costs?”

Formula:

Breakeven months = Closing costs ÷ Monthly savings

• Closing costs: $3,600
• Monthly savings: $150

Breakeven = 3,600 ÷ 150 = 24 months

If you plan to move or sell the property before 24 months, refinancing might not make financial sense.

When refinancing usually makes sense

• New APR is at least 1% lower than your current rate
• You plan to stay in the home beyond the breakeven point
• You are not extending the loan so much that total interest becomes higher
• You can refinance without huge prepayment penalties on the old loan

Common refinance mistakes

• Focusing only on monthly payment, ignoring total interest
• Extending a nearly-paid loan back to 30 years “for comfort”
• Rolling high closing costs into the balance without calculating breakeven
• Refinancing too often and paying fees each time

Sometimes a slightly higher monthly payment with a much shorter term is financially better than a very low payment stretched over decades.

FAQ

Is refinancing free?
No. Most refinances involve closing costs: appraisal, title, origination fees, and other charges. That is why this calculator includes closing costs in the comparison.

Can I roll closing costs into the new loan?
Yes, many lenders allow it. But it increases the loan balance, so you pay interest on those fees as well.

Does refinancing hurt my credit score?
A small, temporary impact is possible due to the hard inquiry and closing of an old account, but the effect is usually minor if payments remain on time.

Should I always pick the longest term for the lowest payment?
Not necessarily. While a longer term lowers the monthly payment, it often increases the total interest paid dramatically. This calculator helps you see that difference clearly.

Use this refinance calculator before talking to lenders so you know exactly how much you need to save and how long it will take to recover your costs.