This tool models standard amortizing loans. The monthly principal-and-interest payment is computed using:
where P = principal, r = monthly rate (APR/12), n = number of months.
Each month, interest is balance × r. Principal paid equals payment minus interest. The balance decreases by the principal paid, repeating until payoff.
Total refinance cost combines interest paid on the new loan plus refinance costs (fees, points, prepaid items, and any penalty). Break-even divides net out-of-pocket costs by monthly P&I savings.
- Enter your current balance, rate, and remaining term.
- Provide the new rate, term, and any cash-out amount.
- Itemize fees, points, and prepaid items from lender estimates.
- Set how long you expect to keep the new loan.
- Click Calculate Total Cost to view results above.
Tip: If you are comparing options, change one variable at a time (rate, points, or fees) and export CSVs for side-by-side review.
Cost components that drive refinance totals
Refinance total cost is more than a lower rate. This calculator adds lender fees, points, prepaid interest, escrow deposits, and any penalty. For a $250,000 payoff, 0.50 points equals $1,250, while $4,500 in settlement fees can equal several months of payments. Rolling fees into the loan raises principal, which increases interest over time even when your rate drops. Always confirm lender credits and third-party charges.
Interpreting break-even and payback timing
Break-even measures how long payment savings need to recover out-of-pocket costs. The tool uses net cash at closing divided by monthly principal-and-interest savings. If you pay $3,000 at closing and save $120 per month, break-even is about 25 months. If savings are negative, break-even is “none,” which signals the refinance is costlier before considering other goals like cash-out. Include taxes only when relevant.
Term length, amortization, and horizon outcomes
Term choice changes the result dramatically. Extending to 30 years often lowers the payment, but it can raise total interest because you repay principal more slowly. A shorter term may increase the payment yet reduce lifetime interest. Use the horizon setting to compare costs over the years you expect to keep the loan, then include the remaining balance payoff at that horizon for a fair apples-to-apples view. Refinancing sooner resets amortization.
Points decisions and financing trade-offs
Points are a trade between upfront cost and rate reduction. Paying points can shorten interest expense if you keep the loan long enough, but it lengthens break-even. Financing points spreads the cost through interest, reducing cash needed at closing while raising long-run cost. Run two cases—points versus no points—and compare both the break-even months and the horizon outflow to see which option dominates. Compare total cost carefully.
Cash-flow items, payoff speed, and exports
Extras like escrow, mortgage insurance, and extra payments affect cash flow and payoff speed. Escrow and mortgage insurance are added to the monthly total for budgeting, and extra payments accelerate principal reduction. In a rising-rate environment, shortening payoff can be valuable. Export the CSV to inspect month-by-month interest and balance paths, then share the PDF summary when negotiating lender credits or fees.
What does closing cash flow represent?
It is the net cash impact at closing: fees, points not financed, prepaid items, and any penalty, minus any cash-out. Positive means you pay out of pocket; negative means you receive cash.
How do rolled-in fees change the calculation?
When fees are financed, they increase the new principal. That reduces cash needed at closing but raises interest because you are paying interest on those costs over the loan term.
Does the calculator include taxes and insurance?
Monthly escrow is included in the total monthly payment for budgeting. Escrow is not treated as a refinance cost, because it funds taxes and insurance rather than lender interest or fees.
Why is break-even based on principal and interest?
Escrow and mortgage insurance may change for reasons unrelated to the refinance rate. Using principal-and-interest isolates the loan economics, so break-even reflects how quickly payment savings recover out-of-pocket refinance costs.
How is the horizon outflow computed?
It sums payments made through the selected horizon, adds escrow and mortgage insurance, then adds the remaining balance you would pay to exit at that time. The refinance option also adds the closing cash flow.
Can I model extra payments or a cash-out refinance?
Yes. Extra payments shorten payoff and reduce interest in both scenarios. Cash-out increases the new loan principal, which raises payment and interest, and the tool shows the resulting closing cash flow and totals.
| Field | Example value | Why it matters |
|---|---|---|
| Current balance | $250,000.00 | Sets remaining interest and baseline payment. |
| Current APR | 6.75% | Higher rates increase remaining interest costs. |
| New APR | 5.75% | Lower rates can reduce monthly P&I. |
| Closing fees | $4,500.00 | Upfront costs extend break-even time. |
| Points | 0.50% | Trade upfront cost for a lower rate. |
| Planned keep period | 7 years | Short horizons favor lower upfront costs. |