Refinance Calculator
Tablet Ad (300×250)
Mobile Ad (320×100)
A refinance calculator is a digital tool that projects the financial outcome of replacing an existing mortgage with a new loan.
Your current loan balance is the principal amount you still owe. This is not your original loan amount. Find this figure on your most recent mortgage statement. Accuracy is necessary, as it serves as the baseline for comparisons.
Step 2 – Enter Current Interest RateInput the annual interest rate on your existing mortgage. This is the nominal rate, not the Annual Percentage Rate (APR). This value is listed on your mortgage statement. The difference between this rate and the new rate is the primary driver of potential savings.
Step 3 – Enter Remaining Loan TermThis is the number of years you have left to pay on your current loan. For example, if you took out a 30-year mortgage five years ago, your remaining term is 25 years. This value calculates how much interest you would pay without refinancing.
Step 4 – Enter Current Monthly Payment (Optional)Providing your exact principal and interest payment can serve as a cross-check. It ensures the calculator's assumptions align with your situation, especially with a unique loan type.
Step 5 – Enter New Loan AmountThis is the amount you wish to borrow. For a standard rate-and-term refinance, this should be your current loan balance from Step 1. For a cash-out refinance, this amount will be higher, including the balance plus the cash you wish to extract.
Step 6 – Enter New Interest RateInput the new interest rate you have been quoted by a lender. This variable has a dramatic impact on the results. Run the calculation with different rate scenarios to understand the sensitivity of your savings.
Step 7 – Enter New Loan TermSelect the term for your new loan. This could be the same as your remaining term or a different term. Shortening the term typically increases monthly payments but reduces total interest paid.
Step 8 – Select Loan TypeChoose the loan product you are considering. The most common types are:
Conventional Loan: Not insured by the government.
FHA Loan: Insured by the Federal Housing Administration.
VA Loan: A benefit for veterans, service members, and their families. The loan type can affect insurance premiums.
Closing costs are fees charged to execute the refinance. They typically range from 2% to 5% of the loan amount and include appraisal fees and title insurance. Ask lenders for a formal Loan Estimate for an accurate figure.
Step 10 – Enter Origination FeesOrigination fees are charges from the lender for processing the new loan. They are often a percentage of the loan amount and are sometimes negotiable. These are a component of the total upfront cost.
Step 11 – Enter Prepayment PenaltySome mortgages include a clause that charges a fee for paying off the loan early. Check your original loan documents. If applicable, this cost must be factored into the refinance equation.
Step 12 – Enter Cash-Out AmountIf you are doing a cash-out refinance, enter the amount of cash you wish to receive after paying off your old mortgage. The calculator adds this to the old loan balance to determine your new loan amount.
Step 13 – Click Calculate to View ResultsAfter clicking calculate, you will see a summary of your financial outlook. The key outputs are:
New Monthly Payment: Your projected payment for the new loan.
Monthly Savings: The difference between your current and new payment.
Interest Savings: The total interest saved over the life of the new loan.
Breakeven Point: The number of months for your monthly savings to equal the upfront costs.
The calculator creates a financial model of your current loan and the proposed new loan. It uses the amortization formula to understand how each payment is split between principal and interest over time. This allows for a comparison of the total cost of each loan path.
The core of the tool is the amortization calculation, which determines the fixed monthly payment required to pay off a loan over a specified term at a given interest rate. This calculation accounts for the fact that each payment covers both interest and principal.
By simulating the entire repayment schedule for both loans, the calculator can tally the total interest paid under each scenario. The difference between these two sums is your projected interest savings.
This is a risk-assessment metric. The breakeven analysis divides the total upfront costs by the monthly savings generated by the new loan. The result tells you how long you need to own the home after refinancing for the deal to become profitable. If you plan to sell the house before the breakeven point, refinancing may cost you money.
| Calculation Type | Formula | Variable Definitions |
|---|---|---|
| Monthly Payment | PMT = P * [r(1+r)^n] / [(1+r)^n - 1] | P = Loan Principal (Balance) r = Monthly Interest Rate (Annual Rate / 12) n = Total Number of Payments (Term in Years * 12) |
| Total Interest Paid | Total Interest = (PMT * n) - P | PMT = Monthly Payment n = Total Number of Payments P = Loan Principal |
| Breakeven Point | Breakeven (months) = Total Closing Costs / Monthly Savings | Total Closing Costs = Sum of all fees Monthly Savings = Old Payment - New Payment |
| Calculation | Formula | Description |
|---|---|---|
| Monthly Rate Current | monthly rate current = (current interest rate / 100) / 12 | Converts annual rate to monthly decimal rate |
| Number of Payments Current | number of payments current = remaining loan term × 12 | Calculates total remaining payments in months |
| Monthly Payment Current | If rate = 0: current balance / number of payments current Otherwise: current balance × monthly rate current × (1 + monthly rate current) ^ number of payments current / ((1 + monthly rate current) ^ number of payments current - 1) |
Calculates fixed monthly payment using amortization formula |
| Total Interest Current | total interest current = (monthly payment current × number of payments current) - current balance | Calculates total interest to be paid on current loan |
| Total Cost Current | total cost current = current balance + total interest current | Total amount paid over life of current loan |
| Calculation | Formula | Description |
|---|---|---|
| Monthly Rate New | monthly rate new = (new interest rate / 100) / 12 | Converts new annual rate to monthly decimal rate |
| Number of Payments New | number of payments new = new loan term × 12 | Calculates total payments for new loan in months |
| Monthly Payment New | If rate = 0: new loan amount / number of payments new Otherwise: new loan amount × monthly rate new × (1 + monthly rate new) ^ number of payments new / ((1 + monthly rate new) ^ number of payments new - 1) |
Calculates fixed monthly payment for new loan |
| Total Interest New | total interest new = (monthly payment new × number of payments new) - new loan amount | Calculates total interest to be paid on new loan |
| Total Cost New | total cost new = new loan amount + total interest new + closing costs + origination fees + prepayment penalty | Total cost including fees for new loan |
| Calculation | Formula | Description |
|---|---|---|
| Monthly Savings | monthly savings = monthly payment current - monthly payment new | Difference between current and new monthly payments |
| Total Upfront Costs | total costs = closing costs + origination fees + prepayment penalty | Sum of all one-time refinancing fees |
| Breakeven Point | breakeven months = total costs / monthly savings (if monthly savings > 0) | Months needed for savings to cover upfront costs |
| Interest Saved | interest saved = total interest current - total interest new | Total interest savings over loan life |
| Total Savings | total savings = total cost current - total cost new | Overall financial benefit of refinancing |
The principal balance is the outstanding amount of the original loan that you have yet to repay. It does not include interest or escrow payments. Each monthly payment reduces this principal, building your equity.
This distinction is critical. The nominal interest rate is the basic cost of borrowing the principal. The Annual Percentage Rate (APR) includes the nominal interest rate plus other lender charges and fees, showing the loan's annual cost. When comparing loans, the APR is often a better metric.
The loan term is the length of time you have to repay the loan in full. Common terms are 15, 20, and 30 years. A shorter term comes with higher monthly payments but less interest paid over time.
These are the one-time fees charged to finalize the new mortgage. They are a major factor in the refinancing decision and must be weighed against potential savings.
Equity is the portion of your home that you own; it's the difference between the property's current market value and your mortgage balance. The Loan-to-Value (LTV) ratio is your loan balance divided by the home's appraised value. Lenders use LTV to assess risk; a lower LTV qualifies you for better rates.
This is the fundamental choice. A rate-and-term refinance changes the interest rate, the loan term, or both, with the new loan amount equal to the remaining balance. A cash-out refinance involves taking out a new loan for more than you owe, pocketing the difference in cash.
This is the most powerful variable. The larger the gap between your current rate and available new rates, the greater the potential savings. A drop of 0.75% to 1% is often a threshold, but the breakeven point is the true test.
Extending your loan term will lower your monthly payment but likely increase the total interest you pay. Shortening the term saves on interest but requires a higher monthly cash flow.
Your credit score determines the interest rate you are offered. A higher score secures a lower rate, improving calculator results. Your DTI ratio must also meet lender thresholds to qualify.
The current market value of your home directly impacts your LTV ratio. If your home's value has increased, you have more equity, which can qualify you for better rates. A decline in value can make refinancing difficult.
High closing costs can erase the benefit of a lower rate, especially if you don't plan to stay in the home long enough to reach the breakeven point. Shopping around for lenders and negotiating fees is necessary.
Refinancing early in a long-term loan often yields the highest savings because you are resetting the clock on decades of interest payments. Refinancing later in the loan term provides less time for monthly savings to recoup the upfront costs.
This is a trade-off. Prioritizing a lower monthly payment frees up cash for other goals but may extend your debt period. Prioritizing total interest savings builds wealth faster but requires a higher monthly commitment.
If you can afford the higher payment, switching to a 15-year loan from a 30-year loan is a powerful wealth-building move. You'll own your home sooner and save a substantial amount in interest.
The breakeven point is your risk meter. If your breakeven point is 24 months and you plan to sell your home in 18 months, refinancing is a poor financial decision. If you plan to stay for 10 years, it's likely a good one.
Ask yourself: Is this refinance about reducing stress by lowering monthly bills? Is it about accelerating my path to being debt-free? Or is it about funding a major renovation? Let your goal guide how you interpret the calculator's output.
Most calculators assume a fixed interest rate for the entire loan term. They do not model Adjustable-Rate Mortgages (ARMs) where the rate can change after an initial fixed period.
Standard refinance calculators typically only calculate principal and interest. Your actual monthly payment to the lender may include escrow for property taxes and homeowners insurance. These costs are unaffected by the refinance but should be considered in your overall budget.
The calculator provides estimates based on the numbers you enter. Actual rates and fees can change daily based on market conditions and are not locked in until you formally apply with a lender.
The calculator's output is an approximation. A formal Loan Estimate from a qualified lender, based on your credit check and a property appraisal, is the source of guaranteed numbers. Use the calculator for exploration and the Loan Estimate for decision-making.
Yes, this is a cash-out refinance. You borrow more than you owe on your existing mortgage and receive the difference in cash. This can consolidate high-interest debt, but it increases your mortgage balance.
Lenders view borrowers with higher scores as lower risk, offering them lower interest rates. A difference of 50 points can change your rate, impacting your monthly payment and total loan cost.
From application to closing, a typical mortgage refinance takes 30 to 45 days. The timeline depends on lender workload, your financial situation, and the appraisal process.
Use a refinance calculator. Input your current loan details and a new loan quote. The key metric is the breakeven point. If you plan to stay in your home longer than the breakeven period, refinancing is likely beneficial.
The core formula is the amortization formula: Monthly Payment = P * [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate, and n is the total number of payments.
Your savings depend on your current rate, new rate, loan balance, and term. A refinance calculator provides a projection of both monthly and total interest savings. A small rate reduction on a large balance can save thousands.
Yes, but it requires a consolidation refinance. The new first mortgage must be large enough to pay off both the existing first mortgage and the second mortgage. Your combined loan-to-value ratio must meet lender requirements.
This is challenging but sometimes possible through government programs like the HARP successor or FHA Streamline Refinance. These programs have specific eligibility requirements for borrowers who are underwater.
Refinancing costs typically range from 2% to 5% of the loan amount. They include lender origination fees, appraisal fees, title insurance, credit report fees, and escrow charges.
You will need proof of income (W-2s, pay stubs), proof of assets (bank statements), information on existing debts, and documentation for the property (homeowner's insurance). The lender will also pull your credit report.
It is more difficult and you will not qualify for the best rates. Options like FHA loans are designed for borrowers with lower credit scores. Improving your credit score before applying is the best approach.
This is a common rule of thumb, but it's not absolute. The true test is the breakeven analysis. If closing costs are very low, a smaller reduction might be worthwhile if you plan to stay in the home long enough.
Closing costs are the fees and expenses you pay to finalize a mortgage. They include services like the appraisal, title search, insurance, and government recording fees, along with the lender's origination charges.
Interest rates determine your monthly payment and the total cost of your loan. A lower rate reduces both your monthly obligation and the total interest paid, making homeownership more affordable.
A full monthly payment (PITI) includes Principal, Interest, Taxes (property taxes), and Insurance (homeowners insurance). Your refinance calculator typically only shows Principal and Interest (P&I).
Yes, but you may have to pay for Private Mortgage Insurance (PMI) on a conventional loan if your equity is below 20%. Government loans like FHA have their own mortgage insurance premiums.
No. A credit check is mandatory for any legitimate mortgage lender. It is required to assess your creditworthiness and determine your interest rate.
Yes, there is no legal limit, provided you qualify based on credit, income, and equity. However, each refinance comes with closing costs, so the financial benefit must justify the expense each time.
This guide is educational. Lenders typically offer conventional, FHA, VA, and USDA refinance loans. Each has unique guidelines. Speak with a loan officer to determine which program you qualify for.
A rate-and-term refinance is for reducing your payment or loan term. A cash-out refinance is for accessing your home's equity for a specific purpose. The latter increases your debt load.
To qualify, you generally need sufficient equity in your home, a steady income, a credit score that meets the lender's minimum, and a debt-to-income ratio that shows you can afford the new payment.
There is no legal limit. You can refinance as often as you want, provided it makes financial sense. Waiting at least six months between refinances is common.
For a conventional refinance, a score of 620 is typically the minimum. For the best rates, a score of 740 or higher is needed. FHA loans may accept scores as low as 580.
Most lenders require at least 5-10% equity for a rate-and-term refinance. For a cash-out refinance, you typically need to maintain at least 20% equity after the cash is taken out.
Refinancing lowers your payment by securing a lower interest rate. It can also lower the payment by extending the loan term, though this often increases total interest costs.
There are "no-closing-cost" refinances, but they are not free. Instead of paying fees upfront, you accept a slightly higher interest rate or the fees are rolled into your loan balance.
No, you are free to refinance with any lender. It is recommended to shop around and get quotes from multiple lenders, including your current one, to get competitive rates.
Scenario: Sarah has a 30-year mortgage from 2019 with a balance of $300,000 at 4.5%. She has 25 years remaining. She is quoted a new 30-year loan at 3.5% with $6,000 in closing costs.
Calculator Inputs:
Current Balance: $300,000 | Current Rate: 4.5% | Remaining Term: 25 years
New Loan Amount: $300,000 | New Rate: 3.5% | New Term: 30 years | Closing Costs: $6,000
Results:
Current Payment: $1,667
New Payment: $1,347
Monthly Savings: $320
Breakeven Point: ~19 months ($6,000 / $320)
Total Interest Saved: Over $40,000
Analysis: This is a good refinance for Sarah. She plans to stay in the home for years, so the 19-month breakeven is justified. The $320 monthly savings improves her cash flow.
Scenario: Mark has paid on his 30-year mortgage for 10 years. The remaining balance is $200,000 at 4.0%, with 20 years left. He qualifies for a 15-year loan at 2.75% with $4,000 in closing costs.
Calculator Inputs:
Current Balance: $200,000 | Current Rate: 4.0% | Remaining Term: 20 years
New Loan Amount: $200,000 | New Rate: 2.75% | New Term: 15 years | Closing Costs: $4,000
Results:
Current Payment: $1,212
New Payment: $1,358
Monthly Increase: +$146
Total Interest Saved: Over $60,000
Analysis: Mark pays an extra $146 per month but saves $60,000 in interest and owns his home 5 years earlier. The calculator confirms the long-term benefit.
Scenario: The Johnsons own a home valued at $500,000. Their mortgage balance is $250,000. They want $50,000 for a kitchen renovation. They refinance into a new loan of $300,000 at 3.75% for 30 years, with $9,000 in closing costs.
Calculator Inputs:
Current Balance: $250,000 | Current Rate: 4.25% | Remaining Term: 25 years
New Loan Amount: $300,000 | New Rate: 3.75% | New Term: 30 years | Closing Costs: $9,000 | Cash-Out: $50,000
Results:
Current Payment: $1,350
New Payment: $1,389
Monthly Increase: +$39
Analysis: The Johnsons are financing their renovation at 3.75%, which is lower than a personal loan. Their payment increases slightly, but they have funded the renovation.
Scenario: David has a small mortgage balance of $100,000 at 4.75% with 15 years left. He is offered a rate of 4.25%, but closing costs are high at $5,000.
Calculator Inputs:
Current Balance: $100,000 | Current Rate: 4.75% | Remaining Term: 15 years
New Loan Amount: $100,000 | New Rate: 4.25% | New Term: 15 years | Closing Costs: $5,000
Results:
Current Payment: $780
New Payment: $752
Monthly Savings: $28
Breakeven Point: ~179 months (almost 15 years)
Analysis: This is a poor refinance candidate. The monthly savings are minimal, and the breakeven point is the entire life of the loan. If David sells before 15 years, he loses money.