Mortgage Refinance Calculator
Compare your current mortgage against proposed refinance terms, monthly savings, and closing cost break-even timeline.
Last verified: September 2026Inputs & Parameters
Calculation Results
Refinancing from 6.50% to 5.00% saves $286.09 per month; break-even is achieved in 16 months.
Evaluating Mortgage Refinance Savings and Break-Even
Refinancing a mortgage replaces an existing home loan with a new debt instrument offering different interest rates, term lengths, or payment schedules. The fundamental financial decision hinges on whether cumulative monthly payment reductions offset upfront loan closing costs.
Core Mathematical Formulas
- Monthly Savings:
Monthly Savings = Current Monthly Payment - New Monthly Payment - Break-Even Timeline (Months):
Break-Even = Upfront Closing Costs / Monthly Savings - Lifetime Interest Impact:
Interest Difference = New Total Interest - Remaining Current Interest
Worked Example
A homeowner has a remaining balance of $320,000.00 at 6.75% interest (25 years left, payment $2,212.44/mo) and refinances into a 5.25% 25-year loan with $5,000.00 closing costs:
1. New Monthly Payment (P&I) = $1,917.92/mo
2. Monthly Payment Reduction = $2,212.44 - $1,917.92 = $294.52/month
3. Break-Even Period = $5,000.00 / $294.52 = 17.0 months (1.4 years)
4. Total Lifetime Interest Saved = $88,356.00
Assumptions & Limitations
Refinancing into a longer term may lower monthly payments while actually increasing total lifetime interest paid. If closing costs are rolled into the new loan balance, interest accrues on those fees over the life of the loan.