Mortgage Refinance Calculator

The core of refinancing relies on comparing amortization schedules between your existing mortgage and your replacement loan. First, the calculator determines your remaining balance and current monthly payment based on your original loan amount, interest rate (r), and remaining term. It then calculates the new monthly payment using your proposed refinance interest rate (rRef) and new loan term (tRef), factoring in any additional cash-out amounts or closing costs (Cost of Refinance = Principal New × Cost Perc + Cost). Finally, the break-even point in months is computed by dividing the total upfront refinancing costs by your monthly payment reduction.

Imagine you have a current mortgage with a remaining balance of $300,000 at a 6.5% interest rate, leaving 25 years on the clock. Your current monthly payment is approximately $2,026. You decide to look at a refinance offer of 5.5% over a new 25-year term, with upfront closing costs totaling $5,000. Your new monthly payment drops to roughly $1,842, saving you $184 each month. To find your break-even point, divide your $5,000 closing costs by your $184 monthly savings, which equals roughly 27.2 months. This means that after about 27 months, your monthly savings will completely offset the upfront closing costs, and every dollar saved thereafter is pure financial benefit.

Always look beyond the monthly payment drop and evaluate your break-even timeline; if you plan on moving before that date, refinancing may cost you more than it saves. Pay close attention to closing fees, as high origination or appraisal charges can significantly inflate your upfront expenses. Finally, consider resetting your loan term cautiously—while extending back out to a 30-year term lowers monthly payments, it can increase your lifetime interest paid.