Mortgage Refinance Calculator

How it works

The current loan is described by what you owe now, its rate and how many payments are left. From those the calculator works out the payment that clears the balance on schedule and the interest still to come if you keep the loan to the end.

The new loan starts at your current balance plus any closing costs you add to the loan and, for a cash-out refinance, the cash you take out. Its payment and lifetime interest come from the new rate and term.

The break-even point is total closing costs (cash plus financed) divided by the monthly saving. If you expect to move or refinance again before that month, the refinance is unlikely to pay for itself.

Lifetime interest is the second test. Stretching the remaining balance over a new 30-year term can lower the payment and still cost more interest in total, because you pay interest for more years. A negative lifetime interest saved means exactly that.

For cash-out, the new loan's loan-to-value ratio is checked against the limit you enter. 80% is a typical cash-out limit for a one-unit main home; lenders and loan programs vary.

Formula

i = annual rate ÷ 12
current payment  = paymentForLoan(balance, i_old, remaining months)
interest to finish current loan = current payment × remaining months − balance
new loan         = balance + financed costs + cash out
new payment      = paymentForLoan(new loan, i_new, new years × 12)
interest over new loan = new payment × new months − new loan
monthly savings  = current payment − new payment
break-even       = (cash costs + financed costs) ÷ monthly savings   (months)
loan-to-value    = new loan ÷ home value   (cash-out: must be ≤ limit)

Example

You owe $250,000 at 7% with 300 payments (25 years) left, a payment of $1,766.95. Refinancing into a 30-year loan at 6% with $6,000 of closing costs paid in cash gives a payment of $1,498.88, saving $268.07 a month.

The closing costs are recovered after 22.4 months. But finishing the current loan costs $280,084.40 in interest, while the new 30-year loan costs $289,595.47, so over its life the refinance costs $9,511.07 more interest, because it adds five years of payments.

Assumptions and limitations

• Both loans are fixed-rate and fully amortizing with end-of-month payments. The current payment is the one that clears your balance in the remaining months you enter, which can differ slightly from your actual payment.
• Monthly payments are principal and interest only. Property tax, homeowners insurance and mortgage insurance are not included and may change when you refinance.
• Savings are simple differences in payments. Money spent on closing costs is not assumed to earn a return elsewhere, and the difference in how fast each loan builds equity is not counted.
• In cash-out mode the new payment includes repaying the cash you take out, so the monthly savings and break-even compare a bigger loan with the current one.
• The 80% cash-out loan-to-value limit is a typical figure, not a guarantee of eligibility. Lenders also look at credit score, income, debts and the property, and limits vary by program.
• Results are an estimate for planning, for informational and educational purposes only, and are not financial, tax or legal advice.

Frequently asked questions