Refinance Calculator

This calculator compares your current mortgage to a refinance offer, showing the new monthly payment, the break-even point on closing costs, and — critically — whether resetting your loan term erases the interest savings from a lower rate.

For personal planning only — not financial advice.

Reviewed by CalculatorDrive Finance Editorial Board · Last updated

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Current Loan

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$

New Loan Terms

Closing Costs

$
$

Enter your current loan and new loan terms to see savings, break-even, and comparison.

The short answer

Refinancing $250,000 at 6.5% (25 years remaining) into a new 30-year loan at 5.5% with $5,000 in closing costs cuts the monthly payment from $1,896 to $1,419.47 — a $476.53/month saving that pays back closing costs in about 11 months. But because the new loan resets to a full 30-year term, it accrues roughly $71,394 more total interest than finishing out the original 25-year loan would have. Lower payment and quick break-even don't automatically mean less interest paid overall — check both.

Key takeaways

  • A 1-point rate drop (6.5% → 5.5%) on a $250,000 balance saves $476.53/month and breaks even on $5,000 in closing costs in about 11 months.
  • Resetting the clock to a new 30-year term after 25 years of the original term were already remaining adds about $71,394 in extra interest over the life of the new loan, even with the lower rate.
  • Break-even point tells you how fast you recoup closing costs — it does not tell you whether the new loan costs more or less in total interest. Check both numbers before deciding.
  • Rolling closing costs into the loan sets break-even to zero months in this calculator, since you pay no cash upfront — but it does increase the loan balance and total interest paid.

How the break-even point works

Monthly savings = old payment − new payment = $1,896.00 − $1,419.47 = $476.53

Break-even (months) = closing costs ÷ monthly savings = $5,000 ÷ $476.53 ≈ 11 months

The break-even point is the simplest, most decision-relevant number this calculator produces: how long you must keep the new loan before the money you saved on payments equals what you spent to get it. In this example, 11 months is short — most homeowners who plan to stay put longer than about a year come out ahead on cash flow. If you plan to move or sell sooner than the break-even point, refinancing likely costs you money net of the effort.

Why a lower rate can still mean more total interest

This is the part a quick break-even calculation misses. The original loan had 25 years (300 months) remaining; the new loan resets to a fresh 30-year (360-month) term. Even at a full percentage point lower, stretching payments over five additional years changes the total interest picture:

Loan Rate Remaining Interest
Current loan (finish 25-year term)6.5%$189,615.61
New loan (fresh 30-year term)5.5%$261,010.10

That is roughly $71,394 more interest paid over the life of the new loan, purely from restarting the amortization clock — the lower rate alone was not enough to offset five extra years of payments. If you want the lower rate without resetting your progress, ask your lender about matching the new loan's term to your remaining term (for example, a 25-year refinance instead of the standard 30-year option), which usually isn't offered by default but often can be requested.

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Frequently Asked Questions

When does refinancing a mortgage make financial sense?

Refinancing often makes sense when you can lower your interest rate enough to offset closing costs within a reasonable time frame — commonly called the break-even point. You should also plan to stay in the home long enough to recoup those costs.

What is the break-even point on a refinance?

Break-even is the number of months until cumulative payment savings equal your closing costs. On a $250,000 balance moving from 6.5% to 5.5% with $5,000 in closing costs, the $476.53 monthly savings pays back those costs in about 11 months. If you sell or move before break-even, you may pay more to refinance than you save.

What are mortgage discount points?

Points are upfront fees paid at closing to buy down your interest rate — one point typically equals 1% of the loan amount. Points can lower monthly payments but increase upfront cost. Evaluate whether the long-term savings justify the cash outlay.

What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a larger loan and gives you the difference in cash. It can fund home improvements or debt payoff but increases your loan balance and may extend your repayment timeline.

Should I restart my loan term when refinancing?

Refinancing into a new 30-year term lowers monthly payments but can increase total interest if you have already paid down your current loan for years. In one example, dropping the rate from 6.5% to 5.5% cut the payment by $476.53/month, but resetting from 25 years remaining to a fresh 30-year term meant paying about $71,394 more in total interest over the life of the new loan. Compare total interest over the remaining original term versus the new term before deciding — or ask your lender about matching the new term to your remaining term.

How do I use this refinance calculator?

Enter your current loan balance, rate, monthly payment, and months remaining. Then enter new rate, new term, closing costs, and optional discount points. Toggle 'Roll closing costs into loan' or add a cash-out amount if applicable, then click Calculate Refinance Savings.

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