This guide walks you through the refinance calculator inputs, break-even logic, and how to interpret monthly vs lifetime savings.
What the Tool Does
The refinance calculator compares your current mortgage to a proposed new loan and calculates monthly savings, break-even month, remaining interest if you keep your current loan, total interest on the new loan, and net savings after closing costs.
Step-by-Step Inputs
- Current Loan: Enter current balance, rate, years remaining. Optionally add your exact monthly payment for accuracy.
- New Loan: Provide the new rate and term. Add closing costs and points if applicable. Check “roll closing costs into loan” if you plan to finance them.
- Calculate: Click Calculate to see monthly savings, break-even months, and interest comparisons.
Example Scenario
- Current balance: $350,000 at 6.5%, 24 years left (P&I ≈ $2,528)
- Refi offer: 5.5% for 30 years, $7,000 costs, no points
- New P&I ≈ $1,988 → Monthly savings ≈ $540
- Break-even: $7,000 ÷ $540 ≈ 13 months
- Interest saved vs current: ≈ $87,000 → Net savings after costs ≈ $80,000
Interpreting Break Even & Net Savings
If your monthly savings are positive, the calculator divides closing costs by savings to find the break-even month. Net savings equals interest saved minus effective closing costs. Green badge indicates strong refi (≤ 36-month break-even and net savings positive), yellow is borderline, red means the refi likely doesn’t help.
Refi vs Extra Payments: Quick Decision Cue
Not sure whether to refinance or simply pay extra on your current mortgage? Use this quick rule of thumb:
- Refi makes sense when you can drop your rate meaningfully (≈0.75%+), break-even in ≤ 36 months, and plan to stay ≥ 4 years.
- Extra payments win when your current rate is already low, closing costs are high, or your timeline is short. Every extra dollar to principal is a guaranteed return equal to your rate.
Run both paths: model your refi in this tool, then compare against our Mortgage Extra Payment guide to see how much interest you can save by adding principal without refinancing.
FAQ
Should I roll closing costs into the loan?
Rolling increases your principal and payment slightly but preserves cash. If your break-even remains under ~36 months and net savings are positive, financing costs can still make sense.
Does the calculator include taxes and insurance?
No. The analysis compares principal & interest only, because escrow items typically don’t change materially with refi unless the property value or insurer changes.
When Refinancing Usually Makes Sense
- Rate drop ≥ 0.75%: Smaller drops can still work with large balances or short break-even.
- Break-even ≤ 36 months: Especially if you plan to stay 4+ years.
- No prepayment penalty: Confirm on your current note/disclosures.
- Positive net savings after costs: Lifetime interest should improve once costs are accounted for.
When You May Skip Refinancing
- Short horizon: Planning to sell or relocate in ≤ 2–3 years but break-even is longer.
- Minimal savings: Payment drop is too small to justify costs/effort.
- ARM curve: If your ARM’s fixed period remains low and stable and refi costs are high, waiting may help.
- Rate-lock timing: If market volatility suggests better offers soon and you can risk the wait.
More Example Scenarios
Shorter Term, Lower Rate
- $420K at 6.25% (23 yrs left)
- Refi: 5.25% at 20 yrs, $6,500 costs
- Payment may rise slightly but lifetime interest drops ~$70K; break-even ~19 months
Points for Rate Buydown
- $600K at 6.5% → 5.375% with 0.75 points
- Costs increase but monthly savings improve; break-even on points ~28 months
Rolling Costs Into Loan
- Finances $7,500 into principal
- Payment +$35/month vs paying cash, but preserves reserves; break-even remains ≤ 18 months
Pro Tips & Troubleshooting
- Match disclosures: Use the override P&I field to mirror your lender’s estimate precisely.
- Stress test: Try ±0.25% on rates and different terms to see sensitivity.
- Net savings check: Ensure interest saved – closing costs/points remains positive.
- Cash flow vs interest: If payment relief matters more than lifetime interest, consider longer terms,but document the trade-off.
Related Tools & Sources
- Mortgage Calculator – visualize amortization and extra payments.
- Home Affordability – confirm the new payment fits your budget.
- Freddie Mac PMMS – mortgage rate trends.
- CFPB on points – points and rate trade-offs.
Run Your Numbers
Open the Refinance Calculator and compare scenarios before you lock a rate.