REFINANCE CALCULATOR

Refinance Calculator — Should I Refinance My Mortgage?

Free refinance calculator for US homeowners. Compare your current mortgage to a new refinance loan, model closing costs, points, and cash-out, and see your break-even period and net benefit at your planned holding horizon.

1. Current Mortgage

Outstanding principal on your current loan.
Current annual rate on your existing mortgage.
Years left on your current loan.

2. New Loan (Refinance)

Rate quoted by the refinancing lender.
Lender, title, appraisal, and recording fees. Typically 2–5% of the loan.
1 point = 1% of the loan. Paid upfront to lower the rate.
Additional cash you receive from the refinance.

3. Tax & Holding Assumptions

Used to calculate your net benefit at your holding horizon.
Federal + state marginal rate, if you itemize deductions.
Used for the real (inflation-adjusted) savings.

4. Reference & Notes

REFINANCE ANALYSIS

Loan Comparison & Savings Projection

Reference: REFI-2026-001
Date:
Current P&I $1,350.42
New P&I $1,164.04
Monthly Savings $186.38
Net Savings at Horizon $10,656.00
Break-Even Period 2.2 Years
Interest (Current, full term) $205,126.00
Interest (New, full term) $214,055.00
Recommendation ✅ Refinance

Cost & Savings Breakdown

Closing Costs + Points $5,000.00
Cash-Out Proceeds $0.00
Tax Deduction Benefit $0.00
Net Benefit at Horizon $10,656.00

Loan Comparison

Current Rate 6.50%
New Rate 5.50%
Rate Reduction 1.00% lower
Payment Change −$186.38

Refinance Formula

Net Benefit at Horizon = (Current P&I − New P&I) × Months at Horizon − Closing Costs + Tax Benefit

($1,350.42 − $1,164.04) × 84 − $5,000 + $0 = $10,656.00

Refinancing recoups closing costs in 2.2 years and saves $10,656 over your 7-year horizon.

Notes

Refinance analysis for mortgage planning

This calculation is for informational and educational purposes. Actual refinance terms, rates, closing costs, and tax treatment vary by lender and taxpayer. Obtain a Loan Estimate and consult a licensed mortgage professional and tax advisor before refinancing.
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Date
GUIDE

How to Use This Refinance Calculator

This free refinance calculator compares your current mortgage to a new refinance loan and shows the numbers that matter: monthly savings, break-even period, total interest, and the net benefit at your holding horizon. Enter your current loan, the proposed refinance terms, and how long you plan to stay in the home. To plan the new payment in detail, pair this with our Mortgage Calculator; for an ARM comparison, use the Adjustable Rate Mortgage Calculator.

1

Enter Current Mortgage

Remaining balance, current rate, and years left on the loan.

2

Enter Refinance Terms

New rate, new term, closing costs, discount points, and any cash-out amount.

3

Add Tax & Horizon

Marginal tax rate, years you plan to stay, and expected inflation.

4

Review Break-Even & Savings

Monthly savings, break-even period, total interest, and net benefit at horizon.

5

Save, Print or Export

Save a draft, print results, or download a PDF of the analysis for your records.

REFINANCE EDUCATION

What Does a Refinance Calculator Calculate?

A refinance calculator — also called a mortgage refinance calculator or refinance break-even calculator — compares your current mortgage to a proposed new loan and reports the metrics that determine whether the refinance makes financial sense: monthly payment change, break-even period, total interest, and net savings over your holding period.

Key refinance calculations

  • Current P&I: Principal and interest on your existing loan, computed from balance, rate, and remaining term.
  • New P&I: Principal and interest on the refinance loan, computed on the new balance (including cash-out and points) at the new rate and term.
  • Monthly Savings: Current P&I minus new P&I.
  • Break-Even Period: Closing costs plus points divided by monthly savings — the time required to recoup upfront costs.
  • Net Benefit at Horizon: Monthly savings × months of planned ownership, minus closing costs, plus any tax benefit.
  • Tax Deduction Benefit: Estimated tax savings on mortgage interest, subject to the mortgage interest deduction ceiling and itemization.
  • Real (Inflation-Adjusted) Net Savings: Net benefit adjusted for expected inflation over the horizon.

Who can use this refinance calculator?

  • Homeowners with Rate Reductions Available: Confirm that refinancing saves money at your holding horizon.
  • Homeowners Shortening Their Term: Compare a new 15-year loan against your remaining 25-year loan.
  • Cash-Out Candidates: Evaluate whether extracting equity makes sense for debt consolidation or home improvements.
  • ARM-to-Fixed Switchers: See the cost of moving from an adjustable to a fixed rate.
  • Home Buyers Planning to Move: Sanity-check whether refinancing is worthwhile before selling.
METHODOLOGY

Refinance Calculator Methodology

MoneyTool uses standard mortgage amortization and time-value-of-money formulas. Every derived metric is transparent about what it captures and what it does not.

1. Current P&I

Current P&I = P × r ÷ (1 − (1 + r)−n)

Where P is the remaining balance, r is the monthly rate (current rate ÷ 12), and n is the remaining months. This is the true principal-and-interest payment, independent of what the borrower may have typed as their gross payment.

2. New loan balance

New Balance = Remaining Balance + Cash-Out + Discount Points

Points are rolled into the loan if not paid out-of-pocket. Cash-out is added because it increases the new principal.

3. New P&I and total interest

New P&I = B × r ÷ (1 − (1 + r)−n)

Total Interest (New) = New P&I × months − B

Where B is the new balance, r is the new monthly rate, and n is the new term in months.

4. Break-even period

Break-Even (months) = (Closing Costs + Points) ÷ Monthly Savings

If monthly savings is zero or negative, no break-even exists — the refinance does not save money.

5. Net benefit at holding horizon

Net Benefit = Monthly Savings × (Years to Stay × 12) − Closing Costs + Tax Benefit

The tax benefit is computed only on deductible interest, subject to the acquisition-debt ceiling ($750,000 under current law).

6. Tax deduction estimate

The calculator applies your marginal tax rate to deductible interest up to the $750,000 acquisition-debt ceiling, and only for the portion of interest that is attributable to acquisition debt (not cash-out). It assumes you itemize deductions and are not subject to the alternative minimum tax.

7. Real net savings

Real Net Savings ≈ Net Benefit ÷ (1 + Inflation)Years to Stay

This adjusts the nominal benefit for purchasing-power erosion over the holding horizon.

Important assumptions

  • Payments are monthly, fully amortizing, and fixed-rate.
  • Closing costs and points are paid at origination (or rolled into the new balance if you enter them that way).
  • Tax benefit assumes the old-regime itemized deduction. The standard deduction may offset it entirely for many households.
  • Property taxes, insurance, HOA, and PMI are not modeled.
  • If you sell before break-even, the refinance loses money.
  • This is an educational estimate, not a Loan Estimate or tax return.
E-E-A-T & SOURCES

Refinance Information, Sources & Editorial Review

MoneyTool separates calculation results from financial education and personalized advice. The calculator uses documented amortization and tax-ceiling rules, while external guidance should be verified with authoritative sources.

Author and editorial responsibility

Methodology reviewed by the MoneyTool Finance Expert Team, a group of accountants, CPAs, and personal-finance analysts who maintain MoneyTool's calculator library and financial education content.

Last reviewed: | Amortization + TILA-RESPA + TCJA rules

Next review: When calculation logic, supported inputs, or relevant guidance changes.

Authoritative U.S. refinance and mortgage resources

  • Consumer Financial Protection Bureau (CFPB) — Refinance: CFPB: Refinance Guide explains when and how to refinance your mortgage, and what to compare.
  • CFPB — Closing Costs: CFPB: Closing Costs lists typical mortgage and refinance closing costs.
  • CFPB — Loan Estimate: CFPB Loan Estimate Explainer walks through the standard 3-page disclosure lenders must provide.
  • Federal Housing Finance Agency (FHFA): FHFA regulates Fannie Mae and Freddie Mac, including the refinance programs they support.
  • Internal Revenue Service — Mortgage Interest Deduction: IRS Topic 505: Interest Expense covers home mortgage interest deduction rules, including the $750,000 acquisition-debt ceiling.
  • U.S. Department of Housing and Urban Development (HUD): HUD Buying a Home provides federal homebuying and housing counseling resources.

External resources are provided for education and verification. MoneyTool is not affiliated with or endorsed by the CFPB, FHFA, Federal Reserve, IRS, HUD, or the FTC.

BEST PRACTICES

Tips for Refinancing Your Mortgage

A lower rate is only one piece of the decision. Check break-even, holding horizon, closing costs, and tax treatment together.

Target a 0.5% Rate Reduction

Refinancing below 0.5% rarely justifies the costs unless you also shorten the term or consolidate debt.

Confirm Your Break-Even

Divide closing costs by monthly savings. If break-even is longer than your planned stay, refinancing loses money.

Compare Loan Estimates Side by Side

Get 3–5 Loan Estimates within a short window to compare APR, closing costs, and lender credits.

Watch the Term Extension

Restarting a 30-year clock reduces monthly payment but raises total interest. Consider a shorter term if cash flow allows.

Model the Cash-Out Carefully

Cash-out raises your balance and total interest. Use the funds for value-adding purposes only.

Consult a Professional

For significant balances or tax-sensitive situations, walk the numbers through with a CPA and a licensed mortgage professional.

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FAQ

Frequently Asked Questions About Refinancing

What is mortgage refinancing?

Refinancing replaces your existing mortgage with a new loan. Borrowers typically refinance to lower the interest rate, shorten the term, switch from an ARM to a fixed rate, or access home equity through a cash-out refinance.

When does refinancing make sense?

Refinancing usually makes sense when the new rate is at least 0.5% below your current rate, your closing costs will be recouped in a break-even period shorter than the time you plan to stay in the home, and the new terms match your financial goals.

How long does it take to break even on a refinance?

Break-even is the time required to recoup closing costs from the monthly savings. Divide total closing costs by monthly savings to get the number of months. Typical break-even periods range from 18 to 48 months.

What are typical refinance closing costs?

Refinance closing costs usually run 2% to 5% of the loan amount and include lender origination fees, appraisal, title search and insurance, recording fees, and prepaid items such as taxes and insurance escrow.

Is mortgage interest tax deductible?

Under the Tax Cuts and Jobs Act, mortgage interest is generally deductible on up to $750,000 of qualified acquisition debt for taxpayers who itemize. Cash-out portions above the original acquisition debt typically are not deductible. Always confirm with a tax professional.

Is a cash-out refinance a good idea?

A cash-out refinance replaces your mortgage with a larger loan and pays you the difference in cash. It can be a good idea for debt consolidation or home improvements at a lower rate than other borrowing, but it increases your loan balance and total interest, and it puts your home at greater risk if you cannot repay.

Is this refinance calculator free?

Yes. MoneyTool provides this refinance calculator free for educational and planning use.

Can I save my refinance analysis?

Yes. Save Draft stores the calculator inputs in your browser. Print Results and Download PDF can be used to keep a copy of the displayed analysis.

LEGAL

Refinance Calculator Disclaimer

This refinance calculator provides estimates for informational and educational purposes. It does not constitute financial, legal, tax, accounting, or lending advice. Actual refinance terms, closing costs, lender credits, tax treatment, and eligibility depend on your lender, credit profile, jurisdiction, and taxpayer situation.

  • Estimates only: Results depend on the inputs and assumptions described in the methodology.
  • Not a Loan Estimate: Official Loan Estimates and Closing Disclosures are issued by the lender under TILA-RESPA rules.
  • Tax treatment simplified: Mortgage interest deduction rules depend on your itemization, acquisition debt, and jurisdiction. Consult a tax professional.
  • Verify before refinancing: Review the lender's Loan Estimate and closing documents before committing.
Last methodology review: . Calculator logic and educational content should be reviewed again whenever the methodology, supported inputs, or relevant external guidance changes.