Refinance Savings Calculator
Compare your current mortgage to a new refinanced loan. See monthly savings, total interest savings, and how long it takes to break even on closing costs.
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How It Works
Refinancing replaces your existing mortgage with a new one, ideally at a lower interest rate. While it can save thousands over the life of the loan, closing costs mean it takes time to recoup the upfront expense. This calculator compares both scenarios side by side so you can decide if refinancing makes financial sense.
The Formula
Monthly Savings = Current Payment - New Payment
Break-Even Months = Closing Costs / Monthly Savings
Total Savings = Current Total Paid - (New Total Paid + Closing Costs)
Variables
- P — Remaining loan balance (principal)
- r — Monthly interest rate (annual rate divided by 12)
- n — Total number of monthly payments
Worked Example
You owe $280,000 at 6.5% with 25 years left. A new 30-year loan at 5.5% with $6,000 closing costs drops your payment from $1,896 to $1,590, saving $306/month. Break-even is about 20 months, and total savings over the life of the loan are roughly $44,000.
Practical Tips
- Refinancing typically makes sense if you can lower your rate by at least 0.5% to 1% and plan to stay in the home past the break-even point.
- A shorter loan term (e.g., 15 years) saves more interest but increases your monthly payment.
- Rolling closing costs into the new loan increases your balance and reduces net savings.
- Check if your current loan has a prepayment penalty before refinancing.
- Shop multiple lenders on the same day so credit inquiries count as a single pull on your credit report.
Frequently Asked Questions
When is refinancing worth it?
Refinancing is generally worth it when you can reduce your rate by at least 0.5%, plan to stay in the home past the break-even point, and the closing costs are reasonable relative to your savings.
What are typical closing costs?
Closing costs for a refinance typically range from 2% to 5% of the loan amount, covering appraisal, title insurance, origination fees, and other charges.
Does refinancing restart my loan term?
Yes. If you refinance into a new 30-year loan, the clock resets. You may pay more total interest even with a lower rate if the new term is much longer than your remaining term.
Can I refinance with bad credit?
You can refinance with lower credit scores through FHA or VA streamline programs, but the best rates require a credit score of 740 or higher.
Should I do a no-closing-cost refinance?
No-closing-cost refinances roll fees into a slightly higher rate. They make sense if you plan to move or refinance again within a few years, but cost more long-term.