Refinance calculator: compare your current mortgage to a new loan
A refinance calculator helps you decide whether replacing your current mortgage with a new loan at a different rate and term will save you money over time. Enter your current balance, rate, remaining term, and the proposed new loan details to see monthly savings, interest savings before fees, net savings after closing costs, and the break-even point where cumulative savings exceed upfront costs.
How mortgage refinancing works
Refinancing replaces your existing mortgage with a new loan, typically at a different interest rate or term length. Homeowners refinance to lower their monthly payment, reduce total interest paid over the life of the loan, shorten the repayment period, or switch from an adjustable-rate to a fixed-rate mortgage.
Refinancing is not free. Lenders charge closing costs that typically range from two to five per cent of the loan balance. Discount points can buy a lower rate, with each point costing one per cent of the loan amount. These upfront costs must be weighed against the long-term savings the new rate provides.
Key formulas
The calculator uses the standard amortization formula to compute monthly payments for both the current and new loan, then compares total interest paid over each remaining term. In practice, the calculator applies this refinance calculator relationship to the user inputs, keeps the units and assumptions consistent, and then surfaces the supporting context needed to interpret the output responsibly.
M = P * r * (1 + r)^n / ((1 + r)^n - 1)
Monthly payment where P is the principal balance, r is the monthly interest rate (annual rate / 12 / 100), and n is the total number of monthly payments.
The month at which cumulative monthly payment savings equal the upfront closing costs and points paid to refinance.
When refinancing makes sense
Refinancing is generally worthwhile when the break-even month falls well before you plan to sell or move. If you expect to stay in the home for several years beyond break-even, the accumulated savings can be substantial. A rate reduction of even half a percentage point on a large balance can save tens of thousands over a long term.
If the new rate is higher than your current rate, or if the combined closing costs and points overwhelm the interest saved, the calculator flags refinancing as not beneficial. Always compare the total cost of the new loan, including closing costs, against the total remaining cost of your current mortgage.
Worked example: refinancing 240,000 from 6.5% to 5.5%
Imagine a homeowner still owes 240,000, has 23 years left on the current mortgage, and is considering a new 30-year refinance at 5.5% with 4,000 in closing costs and no discount points. The refinanced payment may fall, but that does not automatically mean the refinance is the cheaper lifetime option because stretching the term can increase the total interest paid.
That is why this calculator compares both monthly savings and total cost. If the break-even point arrives in 18 months but the borrower expects to move within a year, refinancing can still be the wrong choice. The result is most useful when you compare the break-even month with how long you realistically expect to keep the property.
Frequently asked questions
What is the break-even point in refinancing?
The break-even point is the month when your cumulative monthly savings from the lower payment equal the upfront closing costs you paid to refinance. After that point, every month of savings is pure gain.
Should I refinance if my new rate is only slightly lower?
Even a small rate reduction can save money over a long term, but the closing costs must be recovered through monthly savings. Use the break-even month to decide: if it falls well within the time you plan to stay in the home, refinancing can still be worthwhile.
What are discount points?
Discount points are an upfront fee paid to the lender at closing to buy a lower interest rate. Each point costs one per cent of the loan amount and typically reduces the rate by a fraction of a percentage point. The calculator includes points in the total closing costs when computing break-even timing.
