Loan comparison

Refinance Calculator

Compare the remaining cost of your current loan with a proposed refinance, including points, closing costs, and optional cash out.

Current and proposed loans

Enter both loan scenarios

Refinance
Refinance comparison

Estimated cost and payment changes

Your refinance comparison will appear here

Enter the current loan, remaining term, proposed rate and term, then add any refinance costs.

What Does the Refinance Calculator Compare?

This refinance calculator compares the remaining cost of your current loan with a proposed replacement. Enter your original loan details and the remaining term to reconstruct the current balance, then describe the proposed rate, term, points, closing costs, and any cash out. The result shows monthly payment changes, total interest for each path, a simple break-even period, and a balance chart.

The estimate covers fixed-rate principal-and-interest payments only. It does not quote a lender, approve a loan, or include taxes, insurance, prepayment charges, or fees you do not enter. Use official Loan Estimates from lenders to compare real offers before making a decision.

How to Enter Your Current and Proposed Loans

  1. Enter Original loan amount ($), Current annual rate (%) and Original term (years) from your original agreement. Use the interest rate, not APR. Enter 6 for 6%, rather than 0.06.
  2. Enter Years remaining and Additional months remaining. For 24 years and 6 months, enter 24 and 6. The combined time must be positive and cannot exceed the original term.
  3. Enter the quoted Proposed annual rate (%), New term years and Additional new-term months. The new term must total at least one month. Additional months must be whole numbers from 0 to 11.
  4. Enter Discount points (%) as a percentage, such as 0.5 for half a point. Enter Other closing costs ($) excluding those points, and Cash-out amount ($) for additional borrowing. Blank optional cost fields count as zero. Negative costs and cash out are not supported.
  5. Select Compare loan options. Compare both payments and both interest totals, then check the new financed amount and chart. Change one input at a time to see what drives the result.

The faint numbers in an empty form are examples, not submitted values. A useful first comparison keeps the proposed term equal to the current remaining term and sets cash out to zero. Then try the lender’s actual proposal.

Refinance Payment and Break-Even Formulas

1. Reconstruct the existing payment and balance

Let P be the original principal, r the current annual percentage ÷ 1,200, N the original term × 12, and R the remaining years × 12 plus additional months. The number of payments already made is k = N − R.

M = P × r ÷ [1 − (1 + r)−N]

B = P(1 + r)k − M × [(1 + r)k − 1] ÷ r

M is the original monthly payment and B is the estimated remaining balance, rounded to cents before calculating the new loan. At a zero rate, M = P ÷ N and B = P − M × k. The method assumes all scheduled monthly payments were made, with no extra principal payments or missed payments.

2. Build the replacement loan

C = B × points ÷ 100 + other closing costs
Q = B + cash out + C

C is the combined points and closing costs; Q is the new financed principal. Apply the same payment formula to Q using the proposed monthly rate and new payment count n. At zero interest, the new payment is Q ÷ n. Points are calculated on B here, rather than on the final new principal. Check the lender’s dollar quote because its points basis may differ.

3. Compare the schedules

Monthly savings = M − new monthly payment
Current remaining interest = M × R − B
New interest = new monthly payment × n − Q

The interest change is new interest minus current remaining interest. The calculator retains payment precision internally and rounds reported money to cents, so multiplying a displayed payment may differ slightly from the reported interest.

4. Estimate payment break-even

Break-even months = round up [C ÷ monthly savings]

This is calculated only when monthly savings are positive. It excludes cash out from the cost numerator. When the new payment is equal or higher, the result says “Never (no savings)”. That means no payment-savings break-even, rather than no possible interest saving. With lower payments and zero costs, the mathematical result is zero months, although the current display also says “Never (no savings)” in that case.

Inputs and Results Explained

Original loan amount ($)
Original principal in dollars, rather than today’s statement balance.
Current annual rate (%) and Original term (years)
The original fixed interest rate and repayment period used to reconstruct the scheduled payment.
Years remaining and Additional months remaining
Time still scheduled on the existing loan. These inputs imply how many payments have already been made.
Proposed annual rate (%) and new term
The replacement loan’s fixed rate and number of monthly payments.
Discount points (%)
A fee calculated on the estimated remaining balance. Enter the quoted rate separately; adding points does not automatically lower it.
Other closing costs ($)
Additional fees financed into the new principal. Exclude points already entered above.
Cash-out amount ($)
Extra borrowing added to the new loan. Only zero or positive amounts are accepted.
Estimated monthly payment change
The difference between the current and proposed principal and interest payments, displayed as more or less per month.
Estimated break-even point
A simple cost recovery estimate using points, closing costs and positive monthly payment savings.
Remaining current-loan interest and Proposed-loan interest
Future scheduled interest from now until each loan’s own payoff date. Already paid interest is excluded.
New financed loan amount and Points and closing costs
The proposed starting principal and combined fees. Fees are included in that principal, rather than treated as a separate cash payment.
Overall assessment and balance chart
A limited payment and interest comparison, plus estimated balances over time. Neither determines eligibility or whether an offer suits your circumstances.

Worked Example: A Lower Rate with a Shorter Term

Consider a $300,000 mortgage originally taken at 6% for 30 years, with 25 years still remaining. The scheduled monthly principal-and-interest payment is $1,798.65. After 60 payments, the reconstructed remaining balance is $279,163.07, with $260,432.40 in interest still due under the current schedule.

Option A — Rate drop to 5.5%, shorter 20-year term

Adding 0.5 discount points ($1,395.82), $4,000 closing costs, and $10,000 cash out gives a new principal of $294,558.89. At 5.5% over 20 years, the new monthly payment is $2,026.23 — roughly $227.58 higher. Total new interest is $191,737.08, a saving of $68,695.32 in interest over the full terms. Because the new payment is higher, there is no payment-savings break-even point for Option A.

Option B — Rate drop to 5.0%, same 25-year term

Using the same costs and cash out but extending to 25 years at 5.0%, the new monthly payment is $1,721.96, saving $76.69 per month. At that rate, the upfront costs of $5,395.82 are recovered in 71 months (approximately 5 years and 11 months). Total interest over the new term is higher than Option A because the repayment period is longer.

Reading the trade-off

Option A cuts total interest more sharply and clears the loan sooner, but raises the monthly payment. Option B lowers the monthly payment and offers a reasonable break-even period, but accumulates more interest over its longer term. The right choice depends on how long you plan to keep the loan and whether the monthly payment difference fits your budget.

How to Read the Comparison

Separate payment relief from total cost

A lower payment can help your monthly budget, but a longer term can leave you paying interest for more years. A shorter term can have the opposite effect, as the example shows. Compare the proposed payoff date and new principal alongside the monthly payment. When taking cash out, remember that the two loans finance different amounts.

Treat break-even as a first check

All entered points and closing costs are financed in this model. Even so, the break-even formula divides those costs by monthly payment savings. It does not compare the remaining debts at a sale date, discount future payments, or calculate the extra interest attributable to financed fees. It also does not cap the answer at either loan’s payoff date. If the estimate extends past your planned holding period or either schedule, request a comparison for that actual date.

Check the points and fee structure

One point normally means 1% of the loan amount, but the rate reduction depends on the offer. This calculator applies the percentage to its reconstructed old balance. It has no switch for fees paid in cash and does not model lender credits. For an offer with a different structure, use the lender’s Loan Estimate to compare the dollar fees and amount financed directly.

Understand what the assessment leaves out

The favorable assessment appears only when the payment and total interest both fall. It is a screening result, not a recommendation. The chart tracks loan balances, not home equity or cash savings. Property value, creditworthiness, loan approval, income tax effects, taxes, insurance, mortgage insurance, escrow and unentered penalties or fees are outside this estimate.

An existing loan with extra payments, missed payments, a modification or an adjustable rate may have a different balance from this reconstructed schedule. Confirm your payoff amount with the servicer. For a mortgage offer, compare the Loan Estimate and final Closing Disclosure, including prepaid interest and cash to close, before committing.

Common Refinancing Mistakes

  • Entering today’s balance as the original amount. The tool would amortize that figure again and understate the starting balance.
  • Using APR as the interest rate. Use the contractual annual interest rate; enter fees separately.
  • Counting points twice. Remove the points charge from Other closing costs if you enter the percentage in Discount points.
  • Treating cash out as profit. It increases the principal and repayment obligation.
  • Comparing a statement’s full payment with principal and interest. Escrow, insurance and other charges are excluded here.
  • Assuming costs are paid in cash. This calculator adds them to the loan and charges interest on the resulting principal.
  • Reading a lower rate as a guaranteed saving. Check the term, fees, payment and interest together, and verify how long you expect to keep the loan.

Frequently Asked Questions

What does refinancing replace?

A refinance uses a new loan to pay off and close the existing loan. The new loan can carry a different interest rate, a different term, a different principal — if costs or cash out are added — and a different lender. After closing, you make payments to the new lender under the new terms.

Why can a lower rate still produce no monthly saving?

Several things can offset a lower rate: a higher loan principal from financed costs or cash out, a much shorter term that raises the required payment, or a large points charge rolled into the balance. The calculator shows all these effects together so you can see the net result.

What is the break-even period and why does it matter?

The break-even is the month in which cumulative monthly savings first equal the financed upfront costs. If you keep the loan past that month, you have effectively recovered those costs. If you sell or refinance before that month, you have not. It is a planning shortcut, not a complete financial analysis.

Should I use the balance on my latest statement?

The form is designed around the original loan amount plus the remaining term. It reconstructs the balance mathematically from the original schedule. For a real transaction, your servicer will provide a dated payoff amount that reflects your actual payment history. Use that figure to verify accuracy before closing.

Are property taxes and insurance included?

No. The payment covers principal and interest only. Property taxes, homeowner's insurance, and mortgage insurance are separate and change independently of your loan terms. When comparing monthly costs, add your escrow amounts to both the current and proposed payment for a complete picture.

What happens if I roll closing costs into the loan versus paying them upfront?

When costs are rolled in, they increase the loan principal and therefore the monthly payment and total interest. Paying them out of pocket keeps the principal lower. The calculator assumes costs are financed. If you plan to pay them separately, leave the closing-cost field at zero and account for the out-of-pocket expense in your own decision.

Does a positive monthly saving mean I should refinance?

Not necessarily. Consider how long you plan to keep the loan, the total interest cost over both terms, any tax implications, and whether the actual quoted terms at closing match the estimate. Review your lender's official Loan Estimate and, if appropriate, consult a financial adviser before committing.

Can I use the calculator for a cash-out refinance?

Yes. Enter the cash amount in the Cash-out amount field. It is added to the new loan principal alongside any points and closing costs. The monthly payment and total interest shown reflect the full replacement loan, including the extra cash. Compare the total cost of a cash-out refinance with alternatives such as a home equity loan or line of credit before deciding.

Sources & References

These primary references explain refinancing tradeoffs and mortgage offer documents. The formulas above describe this calculator’s implementation; lender terms can differ.