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Mortgage refinance calculator

Get an idea of what you might pay with new terms and rates.

Many homeowners wonder if they should refinance their mortgage — especially when interest rates drop. But just like a new loan, refinancing comes with closing costs. Our refinance calculator can help you understand your breakeven point, how long it’ll take to recoup those closing costs and how much money you stand to save.

How to calculate refinancing savings

To find out how much you can save, crunch the numbers and compare your current mortgage to a potential new loan.

  1. Analyze your original loan. Find out how much you currently owe on your mortgage by searching your mortgage statements, logging into your loan servicing account or contacting your lender.
  2. Compare your new prospective loan. Your loan amount is your current mortgage balance, with a new interest rate.
  3. Calculate your potential savings. Look at the monthly payments and interest over the course of the loan to see if refinancing achieves your goal.

To illustrate, let’s say you borrowed $200,000 on a 30-year loan 10 years ago. The interest rate is 4.5%, and your monthly mortgage payments are $1,010 a month. After 10 years, your loan balance is approximately $160,180.

If you refinanced your mortgage to lock in a lower rate of 4.25% with the $160,180 loan amount, your monthly payment might drop to $990. Refinancing may lower your monthly payment and the total interest paid over the course of the loan. These savings do not include the costs and fees of refinancing.

Consider the breakeven period

The breakeven period is the number of years it takes to recoup the refinancing costs. Depending on how much you still owe on your current mortgage, it can take months or years to break even, so consider how long you plan to stay in your home before you refinance.

Let’s say your refinancing fees total $6,000. Your original monthly payment was $900, and refinancing drops your monthly payment to $800, saving you $100 monthly.

Your breakeven point is your closing costs divided by your monthly savings — or in this case, $6,000 divided by $100. It would take five years to recoup the costs of refinancing.

If you sell your home within five years after you refinance, you stand to lose money. Whereas staying in your home past the breakeven point will save you money in the long run.

Bottom line

Before making the decision to refinance, make sure it will save you money over the life of the loan. If you’re looking to take advantage of a lower interest rate or get a shorter loan term, use our mortgage refinance calculator to make sure you’ll recoup the closing costs and actually save money.

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