How mortgage refinance calculator works
Refinancing means replacing your existing home loan with a new one, usually at a lower interest rate or different term. The new lender pays off your old loan balance and you begin making payments on the new loan. The goal is to reduce your monthly payment, pay less total interest over time, or both — but closing costs (appraisal fees, title insurance, origination fees) eat into those savings until you've recouped them through lower payments.
This calculator amortizes both your current loan (using its remaining balance, rate, and years left) and the proposed refinance loan (using the same balance, the new rate, and new term). It computes the fixed-rate monthly payment for each using the standard formula M = P × r ×(1+r)^n /((1+r)^n −1). The difference in monthly payments shows immediate cash-flow impact. Total interest on each loan reveals long-term cost. Closing costs are subtracted from interest savings to show net benefit.
The break-even point tells you how many months of monthly savings it takes to recover your closing costs. If you plan to sell before then, refinancing may not be worthwhile even if the rate looks better. The net savings figures compare total costs: full-term net savings assumes you keep the new loan to maturity; comparison-term net savings uses the shorter of the two terms for a conservative estimate. A shorter term (e.g., 15 years instead of remaining 25) often raises the payment but can save tens of thousands in interest.