Calculator Inputs
Example Data Table
| Current Balance | Current Rate | Current Term Left | New Rate | New Term | Closing Costs | Financed Costs | New Payment | Monthly Savings | Break Even |
|---|---|---|---|---|---|---|---|---|---|
| $250,000.00 | 7.25% | 25 years | 5.50% | 25 years | $4,500.00 | Yes | $1,562.85 | $244.16 | 18.4 months |
| $185,000.00 | 6.80% | 18 years | 5.40% | 15 years | $3,000.00 | No | About loan dependent | May vary | Depends on fees |
Formula Used
1) Monthly Mortgage Payment
Payment = L × r ÷ (1 − (1 + r)−n)
Where L is loan amount, r is monthly rate, and n is total monthly payments.
2) New Loan Amount
New loan = current balance + cash out + financed closing costs
3) Scheduled Monthly Savings
Scheduled savings = current payment − new scheduled payment
4) Break Even Time
Break even months = closing costs ÷ monthly payment savings
This shows how long it may take for payment savings to recover refinance costs.
5) Net Lifetime Savings
Net lifetime savings = current remaining cost − refinance total cost
The refinance total cost includes financed fees, interest, and any out-of-pocket closing costs.
How to Use This Calculator
- Enter your remaining balance, current rate, and remaining term.
- Enter the proposed refinance rate and the new loan term.
- Add closing costs and any optional cash out amount.
- Choose whether closing costs are rolled into the new loan.
- Add an optional extra monthly payment for faster payoff testing.
- Enter how many years you expect to keep the loan.
- Click Calculate Refinance to view results above the form.
- Review payment savings, break even timing, interest changes, and the chart.
- Use the CSV and PDF buttons to export the summary.
FAQs
1) What is a rate reduction refinance?
It replaces your current mortgage with a new loan at a lower interest rate. The goal is usually a lower payment, lower interest cost, or both.
2) Why can my payment drop but total cost still rise?
A longer new term can reduce monthly payment while increasing total interest paid over time. Fees and financed closing costs can also raise long-run cost.
3) What does break even mean here?
Break even estimates how many months of payment savings are needed to recover closing costs. A shorter break even period is usually more attractive.
4) Should I finance closing costs or pay them upfront?
Financing costs reduces cash needed at closing, but increases the new loan balance. Paying upfront lowers the new balance, though it requires more immediate cash.
5) How does extra monthly payment affect the results?
Extra payment can shorten payoff time and cut interest. It may also reduce or remove monthly cash flow savings because you are choosing to pay more each month.
6) Why does expected stay matter?
If you plan to move, sell, or refinance again before break even, the refinance may not recover its costs. Time horizon is a key decision factor.
7) Is cash out included in the comparison?
Yes. Cash out increases the new loan amount, so it affects payment and total cost. It also changes the comparison because you receive funds at closing.
8) Is the lowest rate always the best choice?
Not always. Fees, loan term, financed costs, and how long you will keep the loan can matter just as much as the rate itself.