Refinance Calculator

What is a refinance?

A refinance replaces your existing mortgage with a new loan. At closing the new lender pays your old balance in full, you sign a new note with a new rate and a new term, and from that day forward you send one payment to one servicer. The house does not move, the title does not change, and your equity stays where it was. What changes is the debt itself: its interest rate, its length, its monthly payment, and sometimes its size.

Three versions cover almost every case. A rate-and-term refinance keeps the payoff roughly the same and changes only the rate, the length of the loan, or both; that is the transaction this calculator models. A cash-out refinance writes a new loan above what you owe and hands you the difference in cash, which is how homeowners borrow against equity at mortgage rates instead of at the double-digit rates unsecured lenders charge. A streamline refinance is available on FHA, VA, and USDA loans and skips the appraisal and most of the income documentation when you already hold a qualifying loan.

The arithmetic that decides whether any of them pays is smaller than it looks. A $325,000 balance at 6.50% over 30 years carries a $2,054.22 payment and $414,520 of interest on top of the principal. Refinance that same balance to 5.75% and the payment is $1,896.61, a saving of $157.61 every month for 360 months. Whether $157.61 a month is worth several thousand dollars of closing costs is the whole question, and it is settled by one number: the break-even month, derived step by step below.

Refinancing is not free and it is not a formality. You requalify: credit report, income documentation, an appraisal, and a fresh debt-to-income review. The lender is underwriting a new loan to you rather than editing the old one, so a job change, a large new debt, or a low appraisal between application and closing can change the rate you are quoted or stop the loan entirely. Closing costs on a refinance run 2% to 6% of the new loan amount, so on $325,000 expect $6,500 to $19,500 and confirm the number in writing before you pay for an inspection.

When to consider refinancing

Refinancing makes sense when the arithmetic works for your timeline, not simply because rates are lower than the number you remember from a few years ago. Six situations justify running the numbers:

• Rate-and-term savings of 0.5% to 1% or more. On a $325,000 balance, moving from 6.50% to 6.00% saves $105.68 a month, to 5.75% saves $157.61, and to 5.50% saves $208.91. Below about half a point the monthly saving rarely recovers $9,750 of closing costs inside a normal hold period.
• Removing private mortgage insurance. Conventional PMI commonly runs 0.5% to 1.5% of the loan amount a year, which on $337,750 is $141 to $422 a month. If a refinance gets you to 80% loan-to-value and deletes that line, add the whole premium to the monthly saving before you judge break-even.
• Dropping lifetime FHA mortgage insurance. An FHA loan originated with less than 10% down carries MIP for all 360 payments. Refinancing into a conventional loan once you reach 20% equity removes it, and on the $337,750 example that is $239.24 a month, or $86,126 across the full term. See the FHA loan calculator for the MIP math.
• Shortening the term. Moving the $325,000 balance from a 30-year at 6.50% into a 15-year at 5.75% raises the payment to $2,698.83 but cuts lifetime interest from the $291,266 still to come on the old loan to $160,790, a saving of $130,476.
• Cashing out for a specific, cheaper purpose. Cash-out normally requires 20% equity. A $400,000 home with $325,000 owed sits at 81.25% loan-to-value, which is short of the line: the 80% maximum loan on that value is $320,000, so no cash is available. At a $450,000 value the same balance is 72.2% loan-to-value and a $360,000 loan is possible, which nets roughly $24,200 after $10,800 of closing costs.
• Locking a fixed payment before an ARM adjusts. A 5/1 ARM written at 5.25% on a $325,000 balance pays $1,794.66. If the first adjustment takes the rate to 7.25%, the payment becomes $2,217.07, a jump of $422.41 or 23.5%. Refinancing into a fixed rate before that date converts a moving number into a fixed one.

The counter-case matters just as much. If you expect to sell before the break-even month, if the closing costs have to be financed and push you above 80% loan-to-value, or if the new term raises total cost, the correct decision is to keep the mortgage you have. Run the break-even against a realistic move date rather than an optimistic one.

How to use this calculator

1. Enter your current loan balance, the remaining principal on the existing mortgage. Your most recent statement or servicer portal shows it to the cent.
2. Enter the interest rate on your current loan and the number of payments left in the term.
3. Enter the new rate you are being quoted and the new term: 360, 240, 180, or 120 months.
4. Enter estimated closing costs. If you do not have a Loan Estimate yet, use 3% of the new loan amount as a placeholder.
5. Read the monthly savings, the break-even month, and the lifetime cost comparison. Then change one input at a time and re-read it.

A realistic set of inputs: current balance $325,000, current rate 6.50%, 300 payments remaining, new rate 5.75%, new term 360 months, closing costs $9,750, which is 3% of the balance. That configuration returns $157.61 of monthly savings and a break-even of 62 months. Because closing costs run 2% to 6%, or $6,500 to $19,500 on $325,000, test both ends of that range rather than the single number on the quote. Prepaid interest is a separate line: at 6.50% you accrue $57.88 a day ($325,000 multiplied by 6.50% divided by 365), collected from the closing date through the end of the month. Escrow reserves are separate again, typically two to six months of property tax and homeowners insurance, which on a $4,800 tax bill and a $1,800 premium runs $1,100 to $3,300 at the table.

How the refinance comparison is calculated

Two formulas do all the work. The first finds the monthly saving, the second finds the month in which that saving has paid for the transaction.

Monthly saving = current payment - new payment

Break-even months = closing costs ÷ monthly saving

Both payments come from the standard amortization formula: the lender divides the annual rate by 12, then solves for the level payment that exactly exhausts the balance over the number of months remaining. Worked end to end on a $325,000 loan at the 6.5% benchmark rate used across this site:

Step 1: the monthly rate on the current loan is 6.50% ÷ 12 = 0.005416667. Step 2: month one's interest is 325,000 × 0.005416667 = $1,760.42, so of the $2,054.22 payment only $293.80 reduces principal. Step 3: the payment is 325,000 × 0.005416667 × 6.991798 ÷ 5.991798 = $2,054.22, where 6.991798 is 1.005416667 raised to the 360th power and 5.991798 is that figure minus 1. Step 4: repeat at the new rate: 5.75% ÷ 12 = 0.004791667, which produces $1,896.61 on the same balance over 360 months. Step 5: the monthly saving is $2,054.22 - $1,896.61 = $157.61. Step 6: $9,750 of closing costs ÷ $157.61 = 61.86, so month 62 is the first month the refinance is ahead.

Then compare both directions, because the new loan is longer than the old one. Keeping the current mortgage costs $616,266 from today forward, which is 300 payments of $2,054.22, of which $291,266 is interest. Refinancing into a fresh 30-year at 5.75% costs $682,780, which is 360 payments of $1,896.61, of which $357,780 is interest: $66,514 more in total, in exchange for $157.61 less each month and 60 additional payments. Refinancing into a 15-year at 5.75% costs $485,790 total with $160,790 of interest, which is $130,476 less interest than staying the course, at $644.61 more per month. Which of those three is correct depends on how long you keep the house and what the payment has to be.

Worked scenarios: rate, term, and break-even

The three tables below hold everything except one variable constant. The baseline is a $325,000 balance, a current rate of 6.50%, a current payment of $2,054.22, and $9,750 of closing costs. All figures are principal and interest only; taxes, insurance, and mortgage insurance are separate lines on the real payment.

Rate scenarios: $325,000 refinance, 30-year term

Half a point of rate is worth $105.68 a month on this balance and a full point is worth $208.91, while a refinance at 7.00% costs $108.01 more than the loan you already hold. That is the arithmetic behind the 0.5% to 1% rule of thumb: closing costs do not shrink when the rate cut is small, so $9,750 takes 93 months to recover at 6.00% but only 47 months at 5.50%. The size of the rate cut, not the fact of a rate cut, is what decides the transaction.

Term scenarios: $325,000 at 5.75%

Shortening the refinance from 30 years to 15 at the same rate costs $802.22 a month and returns $196,990 of interest, which is the gap between $357,780 and $160,790. Measured against the loan you actually hold, where $291,266 of interest is still to come at 6.50%, the 15-year saves $130,476. The 20-year is the middle path: $385.16 more a month than the 30-year refinance, $135,155 less interest, and a payoff five years sooner. Lenders also price the shorter terms lower, so a real 15-year quote often lands below 5.75% and widens the gap further.

Break-even by closing cost and monthly saving

Closing costs are the input most within your control, because they are negotiable and they differ lender to lender. The table gives the break-even month for four cost levels against three rate cuts. Read each cell as the number of months you must keep the loan before the refinance is ahead.

Two cells in that table are warnings. $19,500 of costs against a 6.00% rate needs 185 months, which is fifteen years and five months of a thirty-year loan, just to break even. Even a cheap $6,500 refinance at 6.00% needs 62 months. If your row and column intersect beyond your realistic move date, the options are to negotiate the costs down, find a larger rate cut, or decline the refinance. The closing cost calculator itemizes the individual charges so you know which line to negotiate.

The costs of refinancing, item by item

Refinance closing costs run 2% to 6% of the new loan amount. On a $325,000 loan that is $6,500 to $19,500, with 3% ($9,750) sitting in the middle of the range. The individual line items:

• Origination or lender fee: 0.5% to 1% of the loan, or $1,625 to $3,250 on $325,000. Some lenders charge a flat $995 to $1,500 instead. It is negotiable and it is the first line to push on.
• Appraisal: $500 to $800 for a single-family home, more in large or remote markets. Required on most rate-and-term refinances and on every cash-out; FHA and VA streamline programs waive it, and some lenders waive it entirely when their automated value model supports the number.
• Title insurance and settlement fee: $1,500 to $3,000, covering the owner's policy, the lender's policy, and the closing or settlement fee. On a refinance you pay all of it; on a purchase the custom varies by state.
• Credit report and verification: $30 to $75 for the report, plus $50 to $100 for employment and asset verification.
• Recording fees: $50 to $250 depending on the county clerk.
• Prepaid interest: daily interest from the closing date through the end of that month. At 6.50% on $325,000 that is $57.88 a day, so closing on the 20th collects roughly $1,158 while closing on the 5th collects about $290. Choose the closing date deliberately.
• Escrow reserves: two to six months of property taxes and homeowners insurance collected at closing. On a $4,800 tax bill and a $1,800 premium the monthly escrow is $550, so reserves run $1,100 to $3,300. The money is yours; it is simply held until the bills come due.
• Discount points: optional, 1% of the loan each and typically worth about 0.25% of rate. One point on $325,000 is $3,250 and moves 6.50% to 6.25%, worth $53.14 a month, for a break-even of 61 months.
• Rate-lock extension: if closing slips past the lock period, usually 30 to 60 days, extensions commonly cost 0.125% to 0.25% of the loan per 15 to 30 days, which is $406 to $813 on $325,000.

Two structural choices change the total more than any single fee. A no-closing-cost refinance rolls the lender's fees into a higher rate: the 5.75% quote becomes about 6.00%, the payment rises from $1,896.61 to $1,948.54, and you start saving in month one instead of month 62 while giving up $51.93 a month of the potential saving for as long as you keep the loan. Rolling costs into the balance has its own trap. Add $19,500 to $325,000 and the payoff becomes $344,500, which against a $420,000 value is 82.0% loan-to-value instead of 77.4%; that pushes a conventional refinance back into PMI at roughly $201 a month on a 0.7% premium, handing back more than the $157.61 the rate cut was meant to save.

Refinancing tips for 2026

• Confirm the 0.5% to 1% test before you spend an application fee. Your existing rate is the benchmark. At 6.50%, the numbers on this page work at 6.00% or lower and get thin at 6.25%. If today's quote is within a quarter point of the rate you already hold, there is no transaction to have.
• Collect three to five Loan Estimates on the same day. Rate sheets move daily, and credit inquiries scored inside a 14-day window count as one. Comparing Monday's quote against last month's flyer hides the real difference; comparing five quotes taken the same afternoon does not.
• Run break-even against a real move date, not a hopeful one. On a 62-month break-even, selling after three years collects $5,674 of savings against $9,750 of costs, a $4,076 loss. Write down the year you would realistically sell before you sign, and hold the refinance to it.
• Ask for the loan-level price adjustment rather than only the rate. Credit score and loan-to-value each move the price. A 680 score against a 760 score commonly costs 0.25% to 0.75% of rate, which on $325,000 is $53.14 to $162.85 a month. Raising a score 40 points before you lock is worth more than a week of watching rate headlines.
• Decide on points with arithmetic. One point costs $3,250, buys about 0.25%, and returns $53.14 a month, which is 61 months to recover. If you will keep the loan past month 61 the point pays for itself; if you may sell or refinance again sooner, keep the cash and use the mortgage points calculator on your own hold period.
• Keep the loan-to-value ratio under 80% when you finance costs. The difference between $9,750 and $19,500 of rolled-in costs on $325,000 is exactly the difference between staying clear of PMI and paying about $201 a month for it. If the quoted costs cross that line, pay them in cash or pick a cheaper lender.
• Hold a payment reserve after you close. Six months of the new $1,896.61 payment is $11,380. A refinance that empties the account to buy $157.61 a month trades a small certain gain for a large uncertain risk, and the payment still comes due on the first.

Common refinance mistakes

• Rolling into a new 30-year without counting the extra payments. Staying put means 300 remaining payments and $616,266. A fresh 30-year means 360 payments and $682,780, six years longer and $66,514 more, even though each monthly check is $157.61 smaller. Compare the totals, not only the payment.
• Judging the decision on monthly savings alone. $157.61 a month reads like free money until you notice it costs $9,750 of cash to buy. Sell in year three and you collect $5,674 of savings against $9,750 of costs, a net loss of $4,076. The saving is real; the horizon is what kills it.
• Shopping one lender. Origination fees alone range from $0 to $3,250 on a $325,000 loan among lenders quoting the identical rate, and title fees vary by hundreds. Request the same loan amount, the same points, and the same lock window from every lender on the same day.
• Rolling closing costs across the 80% loan-to-value line. $19,500 added to $325,000 against a $420,000 value moves you from 77.4% to 82.0%, reintroduces PMI at about $201 a month, and gives back more than the refinance saved in the first place.
• Ignoring a prepayment penalty on the existing loan. Most loans originated after 2014 carry none, but a loan that does typically charges 1% to 5% of the balance, which is $3,250 to $16,250 on $325,000. Read the note before you pay for an appraisal.
• Forgetting that escrow restarts. A new servicer collects a fresh set of tax and insurance reserves, up to $3,300 in the example above, and then runs an escrow analysis. Taxes are often reassessed after a sale, so the finished payment can land $100 a month above the figure you approved.

Frequently asked questions

How much does it cost to refinance a mortgage? Refinance closing costs typically run 2% to 6% of the new loan amount, which is $6,500 to $19,500 on a $325,000 loan with 3% ($9,750) the middle of the range. The main lines are an origination fee of $1,625 to $3,250, an appraisal of $500 to $800, title and settlement of $1,500 to $3,000, plus prepaid interest and escrow reserves. Lenders must deliver a Loan Estimate within three business days of application.

How do I calculate my refinance break-even point? Divide your closing costs by your monthly saving. A $9,750 cost against $157.61 a month gives 61.86, so month 62 is the first month you are ahead. The monthly saving itself is your current payment minus the new payment: $2,054.22 minus $1,896.61 on a $325,000 loan moving from 6.50% to 5.75% over 30 years.

Is refinancing worth it if I plan to sell soon? Only if you sell after the break-even month. With $9,750 of costs and $157.61 of monthly savings, selling after three years collects $5,674 and leaves a $4,076 loss; selling after seven years collects $13,239 for a $3,489 net gain. Match the break-even to a move date you would actually accept, and decline the loan if it does not clear it.

Can I refinance with less than 20% equity? Yes. Rate-and-term refinances go to 95% loan-to-value on conventional loans, 96.5% on FHA, with mortgage insurance attached. On a $400,000 home with $325,000 owed you are at 81.25% loan-to-value, so a conventional refinance would carry PMI of roughly $190 a month at a 0.7% premium, which is more than the $157.61 the rate cut saves. Add that line before you call it a saving.

Do I need an appraisal to refinance? Usually yes, at $500 to $800, ordered after you apply. FHA and VA streamline refinances waive it, and some conventional lenders issue appraisal waivers when their automated value model supports the price. An appraisal that comes in low can raise your loan-to-value, change the rate, reduce the cash you receive on a cash-out, or end the loan.

How soon after closing can I refinance again? Most programs impose seasoning. FHA's streamline requires six on-time payments and 210 days from the prior note date, VA has a similar 210-day rule, and conventional lenders commonly want six to twelve months of payment history with a credit score of 620 or better. Refinancing twice inside a year is rarely possible and never cheap.

Does refinancing reset my loan term? Yes, if you choose a new 30-year. Five years into a $325,000 loan at 6.50% you have 300 payments and $616,266 left to pay. A fresh 30-year at 5.75% turns that into 360 payments and $682,780. Choosing a 15-year instead costs $2,698.83 a month but totals $485,790, which is $130,476 less interest than staying on the old schedule.

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