What a refinance is (and what this calculator does)

Refinancing means replacing your current loan with a new loan. People refinance to lower the interest rate, change the loan term (e.g., 30 → 15 years), switch from a variable rate to a fixed rate, or pull cash out (cash-out refinance). The catch is that refinancing usually comes with costs (origination, appraisal, title, etc.). This calculator helps you decide if the switch is worth it by comparing: monthly payment, total interest remaining, lifetime cost, and your break-even time (how long it takes for savings to pay back closing costs).

Use it for mortgages, student loans, auto loans, or any amortizing installment loan. The math is the same: you have a balance, an interest rate, and a number of months remaining. The calculator assumes fixed-rate payments for both your current loan (from today forward) and the proposed new loan.

• If break-even months is less than the time you expect to keep the loan, refinancing is often attractive.
• If the new rate is much lower and you keep the term similar, you typically save interest.
• If you extend the term, your payment may drop but total interest can rise (you’re paying longer).
• If you shorten the term, payments may rise, but you can save big on interest and build equity faster.

Core refinance formulas used

The calculator uses the standard amortizing loan payment formula. We work with a monthly interest rate r and number of months n.

If P is principal (balance), r is monthly rate (APR ÷ 12), and n is remaining months:

Payment = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1)

If the interest rate is 0%, payment becomes P / n.

Total interest (remaining) = Payment × n − P (because the remaining payments contain principal + interest).

If you roll closing costs into the loan: New principal = Current balance + Closing costs + Cash-out. If you pay closing costs upfront, the new principal becomes: New principal = Current balance + Cash-out, and closing costs are treated as an upfront cash expense.

Break-even is the number of months required for your monthly savings to “pay back” upfront costs: Break-even months = Upfront costs ÷ Monthly savings. If monthly savings are negative (your new payment is higher), the calculator reports that there is no break-even in the usual sense.

Refinance examples (realistic scenarios)

Suppose your current balance is $250,000, rate 7.25%, and you have 300 months left. You’re offered 6.25% for 300 months with $5,000 closing costs.

• The new payment typically drops.
• You’ll see monthly savings; break-even might be around a few years depending on costs.
• Total interest remaining usually decreases when the rate drops and term stays similar.

Same $250,000 balance, but you refinance to 15 years at a lower rate. The new payment may rise, but the total interest can drop dramatically because you pay the balance down faster.

• Monthly payment: higher
• Total interest: much lower
• Break-even: may be instant on total interest, but cashflow may feel tighter

If you extend the term (e.g., reset back to 30 years), the payment can fall, but you might pay more total interest over time—even with a lower rate—because you’re stretching payments over more months.

Pro tip: Run the calculator twice—once with “same remaining months” and once with “new longer term”—to see the trade-off between monthly cashflow and long-term cost.

How to use this refinance calculator

1. Enter current balance and your current interest rate.
2. Enter months remaining (or years remaining) on your existing loan.
3. Enter the new interest rate you were offered and the new term.
4. Add closing costs and choose whether you’ll roll them into the new loan.
5. (Optional) Add cash-out if you plan to borrow extra.
6. Click Calculate to see monthly payment difference, break-even months, and total cost comparison.

Break-even only measures the payback of upfront costs using monthly savings. It does not automatically mean “refinance is good” or “bad” because life happens: you may move, sell, refinance again, or pay extra principal. Treat break-even as a useful checkpoint, not a final verdict.

Refinance Calculator FAQ

• Does this include taxes and insurance?

  No. This calculator focuses on the loan math (principal + interest). If you’re comparing mortgages, your total monthly payment may include escrow for property taxes and insurance, which can change independent of the interest rate.

• What if I plan to make extra payments?

  Extra payments change the timeline and interest paid. Use this tool for a baseline comparison, then consider running a separate payoff or amortization schedule tool for “extra payment” scenarios.

• Should I roll closing costs into the loan?

  Rolling costs increases your principal, which increases total interest. Paying upfront avoids financing fees, but requires cash now. This calculator lets you compare both options instantly.

• How much rate drop makes refinancing “worth it”?

  There’s no universal number. It depends on your balance, term, closing costs, and how long you’ll keep the loan. The best practical test is the break-even month + total interest comparison.

• Does refinancing restart the clock on interest?

  In a sense, yes—if you extend the term, you pay interest for longer. However, a sufficiently lower rate can still reduce total interest. Always compare the total remaining cost, not just the monthly payment.

• Is this financial advice?

  No. This is an educational calculator to help you understand refinance math. For big decisions, consult a licensed professional who understands your full situation.

Refinance tips that improve real-world accuracy

• Use your true remaining months (don’t assume “30 years” if you’re already 5 years in).
• Compare APR, not just rate when fees differ (APR bakes in most lender fees).
• Include discount points in closing costs if you’re paying points to buy down the rate.
• Don’t forget opportunity cost: paying $6,000 upfront costs could have been invested or used elsewhere.
• Plan for time horizon: if you’ll move in 2 years, a 6-year break-even is not ideal.

Want a “viral” way to share this tool? Screenshot the results card, post it with: “Rate cut vs term reset: which saves more?” and tag a friend who’s refinancing.