Mortgage Refinance Calculator
Refinance Analysis
What Is a Mortgage Refinance Calculator?
A Mortgage Refinance Calculator is a financial planning tool that compares the remaining cost of your existing mortgage against the projected cost of a refinanced loan. By entering your current loan balance, current interest rate, remaining loan term, proposed new interest rate, new loan term, and refinance closing costs, you can estimate how refinancing may affect your monthly payment and total loan costs.
This calculator is useful for homeowners considering a lower interest rate, changing their loan term, or evaluating whether refinance costs can be recovered through monthly payment savings.
A mortgage refinance calculator estimates whether refinancing could lower your monthly principal-and-interest payment and how long it may take to recover closing costs. It also compares the total remaining cost of your current loan with the total projected cost of the new loan, helping you evaluate the financial impact of refinancing.
How the Mortgage Refinance Calculator Works
The calculator uses the standard fixed-rate mortgage payment formula to calculate both the current loan payment and the proposed new loan payment.
Where:
- PMT = Monthly principal and interest payment
- P = Loan balance
- r = Monthly interest rate (annual rate divided by 12)
- n = Total number of monthly payments remaining
If the interest rate is 0%, the calculator simply divides the balance by the number of months remaining.
The calculator then determines:
- Current monthly principal-and-interest payment
- New monthly principal-and-interest payment
- Monthly savings or payment increase
- Total lifetime savings or additional cost
- Break-even period for closing costs
For example, assume you have a remaining loan balance of $250,000 with 20 years left at 6.5%. You refinance into a new 20-year loan at 5.5% with $3,000 in closing costs paid upfront.
The current monthly payment is approximately $1,864. The new monthly payment is approximately $1,719. Monthly savings are about $145. The break-even point is roughly 21 months because the calculator divides the $3,000 closing cost by the monthly savings. The refinance would also reduce total remaining loan costs over time.
If you choose to roll closing costs into the new loan balance, the calculator adds those costs to the refinanced balance before calculating the new payment.
How to Use the Mortgage Refinance Calculator: Step by Step
- Enter your current loan balance in dollars. This should be the amount you still owe on your mortgage.
- Enter your current mortgage interest rate as an annual percentage.
- Enter the remaining term on your current loan in years.
- Enter the new interest rate offered for the refinance.
- Enter the new loan term in years. The calculator defaults to 30 years, but you can choose a different term.
- Enter your expected refinance closing costs. The calculator uses a default value of $3,000 if no cost is entered.
- Select whether you will pay closing costs upfront or roll them into the new loan balance.
- Click the Calculate Refinance button to view your results.
The results show your current monthly payment, new monthly payment, monthly savings, lifetime savings or cost, and break-even period. Positive savings indicate lower projected costs, while negative values indicate the refinance may increase your costs based on the information entered.
What Your Mortgage Refinance Results Mean
Monthly Savings
Monthly savings represent the difference between your current principal-and-interest payment and your projected new payment. A positive result means the refinance lowers your monthly payment. A negative result means the new payment is higher.
Lifetime Savings or Cost
The calculator compares the total remaining cost of your current loan with the total projected cost of the new loan. If closing costs are paid upfront, they are included in the new loan cost calculation. If closing costs are rolled into the loan, they become part of the refinanced balance.
Break-Even Time
The break-even period estimates how long it takes for monthly savings to recover the refinance closing costs. If monthly savings are not positive, the calculator reports that the refinance never breaks even. If there are no closing costs, the break-even period is immediate.
| Result | What It Indicates |
|---|---|
| Positive Monthly Savings | New payment is lower than the current payment |
| Negative Monthly Savings | New payment is higher than the current payment |
| Positive Lifetime Savings | Total projected loan cost is lower |
| Negative Lifetime Savings | Total projected loan cost is higher |
| Short Break-Even Period | Closing costs are recovered sooner |
| Never Break Even | Monthly payment does not decrease |
Remember that this calculator estimates principal and interest payments only. Property taxes, homeowners insurance, mortgage insurance, escrow adjustments, and lender-specific fees are not included in the calculations.
Mortgage refinancing decisions involve many factors. Actual costs and savings may vary based on lender fees, loan programs, taxes, market conditions, credit qualifications, and other financial considerations. The results should be used as an estimate rather than financial advice.
Frequently Asked Questions
What does a mortgage refinance calculator calculate?
A mortgage refinance calculator estimates the financial impact of refinancing your existing mortgage. It calculates your current monthly payment, projected new payment, monthly savings, lifetime savings or cost, and the estimated time needed to recover refinance closing costs.
How do I calculate refinance savings?
Refinance savings are calculated by comparing your current monthly principal-and-interest payment with the projected payment on the new loan. This calculator also compares total loan costs over time to estimate overall lifetime savings or additional costs.
Why does the calculator ask about closing costs?
Closing costs affect the true cost of refinancing. The calculator uses closing costs when estimating lifetime savings and break-even time. You can choose whether those costs are paid upfront or added to the refinanced loan balance.
What happens if I roll closing costs into the loan?
When closing costs are rolled into the loan, the calculator increases the refinanced balance by the amount of those costs. This generally raises the new payment and total loan cost compared with paying the costs upfront.
How is the break-even point calculated?
The break-even point is calculated by dividing refinance closing costs by monthly savings. The result estimates how many months it takes for the payment reduction to recover the upfront cost of refinancing. If monthly savings are not positive, no break-even point exists.
Does this calculator include taxes and insurance?
No. This calculator only estimates principal and interest payments. Property taxes, homeowners insurance, mortgage insurance premiums, escrow payments, and other housing costs are not included in the results.
How accurate is a mortgage refinance calculator?
The calculator provides an estimate based on the information you enter. Actual refinance results may differ due to lender fees, interest rate changes, loan terms, taxes, insurance costs, and underwriting requirements that are not included in the calculation.