Refinance Calculator 2026

How the refinance math works

A refinance replaces your current mortgage with a new loan, and the comparison comes down to three calculations. The first two describe your cash flow; the third tells you whether you actually save money.

1. New monthly payment. Your remaining balance — plus closing costs if you roll them in — is re-amortized at the new rate over the new term.
2. Monthly savings = current payment − new payment.
3. Break-even months = closing costs ÷ monthly savings. With $4,500 in closing costs and $250 in monthly savings, you break even in 18 months. Everything from month 19 onward is real profit.

The payment itself comes from the standard amortization formula: M = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the principal, r is the monthly rate (the annual rate ÷ 12), and n is the total number of monthly payments.

The final verdict is the lifetime cost comparison. Remaining cost on your current loan = current payment × months left. Total cost of the new loan = new payment × new number of months + any closing costs paid in cash. The difference is your lifetime savings — and it can come out negative even while the monthly payment falls. The term reset trap section below shows exactly how.

Five factors that decide if refinancing is worth it

Five things determine whether a refinance actually pays: the rate gap, closing costs, the remaining term versus the new term, how long you'll keep the home, and your credit and equity. A weak score on any one of them can turn a lower payment into a net loss.

1. The rate gap. Most loan officers treat 0.75–1 percentage point as the "worth a serious look" threshold, but the real test is your break-even time, not the gap itself. A 0.5-point gap with low closing costs can still pay off if you'll stay in the home another 10 years.
2. Closing costs. These typically run 2–5% of the loan amount — origination fee, appraisal, title insurance, and similar charges. On a $320,000 balance, that's roughly $6,400–$16,000, and higher costs mean a longer break-even. Rolling costs into the loan avoids the upfront bill, but the costs start accruing interest, so your monthly savings shrink. "No-closing-cost" loans work the same way: the bill moves into a permanently higher rate.
3. Remaining term vs new term. Refinancing a 30-year loan you've paid for 4 years into a new 30-year loan stretches the debt to 34 years in total. The payment drops sharply, but total interest often rises. To genuinely save money, set the new term at or below your remaining term.
4. How long you'll keep the home. Break-even is a hard constraint. If you expect to sell within 3 years and your break-even is 4 years out, the refinance is a net loss no matter how good the new rate looks.
5. Credit score and LTV. The rate a lender quotes depends on your credit score and how much equity you have, so check both before you test numbers here. The rates in this calculator are your inputs, not quotes — the lender's official Loan Estimate is the document that governs.

The term reset trap

The term reset trap is a refinance that lowers your monthly payment by stretching your debt over more years, so total interest climbs even as the payment falls. It's the most common way a refinance that looks like a win quietly costs you money.

Take a $320,000 balance at 7.5% with 26 years left. Refinance to 6.25% on a new 30-year term and the payment drops by about $480 a month — it looks great until you notice the debt just got longer. Stretching 26 years (312 payments) into 30 years (360 payments) means 48 extra monthly payments, and the added interest can push lifetime cost higher, not lower. Take the same 6.25% rate on a 25-year term instead: the payment still falls, and the lifetime interest savings run into six figures.

The rule: a lower payment is cash-flow relief, not necessarily savings. This calculator prints lifetime savings right in the results so the trap has nowhere to hide — its default inputs reproduce the example above, so you can watch it happen live. If your real goal is lower monthly pressure, stretching the term is a legitimate choice. Just make it with your eyes open.

How to use this calculator

Work top to bottom: enter your current loan, then the new offer, then decide how to handle closing costs. Every result updates as you type.

1. Under Current mortgage, enter Remaining balance, Current rate, and Years remaining. Your latest mortgage statement or loan portal has all three.
2. Under New loan, enter the New rate — use an actual quote from a lender, not an advertised rate — and pick a New term: 30, 25, 20, 15, or 10 years.
3. Enter the quoted dollar amount in Closing costs, then use the second Closing costs selector to choose Pay out of pocket or Roll into new loan. Toggle between the two to see how financing the costs changes the results.
4. Read the results: Monthly savings at the top (it switches to Monthly payment change if the new payment is higher), then Current monthly P&I, New monthly P&I, Break-even on closing costs, and Lifetime savings, defined as current remaining cost vs new total cost. If the payment rises, a warning appears and break-even reads "Never (new payment is higher)" — that structure only makes sense when you're shortening the term.
5. Run it again with the New term set at or below your Years remaining and compare the two structures side by side.

Refinance FAQ

Straight answers to the eight questions homeowners ask most before refinancing. Each one runs on the same math as the calculator above.

Is it worth it to refinance?

The traditional threshold is a rate drop of 0.75–1 percentage point, but the better test is your break-even point: closing costs ÷ monthly savings. If you'll keep the home past break-even, even a 0.5-point drop can pay off. A bigger gap won't help if you sell within a year.

How much does it cost to refinance?

Expect 2–5% of your loan amount, covering the origination fee, appraisal, title insurance, and recording fees. On a $320,000 balance that's roughly $6,400–$16,000. Some lenders offer "no-closing-cost" loans, but the cost doesn't disappear — it moves into a higher rate. The lender's Loan Estimate is the authoritative figure.

How do you calculate the break-even point on a refinance?

Divide your closing costs by your monthly savings. With $4,500 in costs and $250 in monthly savings, you break even in 18 months — from month 19, that $250 is real profit. Selling or refinancing again settles the ledger early, so leaving before break-even means a net loss.

Why is my payment lower but my lifetime savings negative?

Because the new term is longer than the time left on your current loan, so you're paying interest for extra years — for example, trading 26 remaining years for a new 30-year term. That can still be the right call if cash flow matters, but compare again with the new term set at or below your remaining years.

Should I pay closing costs upfront or roll them into the loan?

If you have the cash, pay out of pocket: the costs don't accrue interest, your monthly savings are larger, and you break even sooner. Rolling costs in preserves cash but adds interest on them, shrinking both monthly and lifetime savings. This calculator supports both modes — toggle "Pay out of pocket" versus "Roll into new loan" to compare.

Does refinancing hurt your credit score?

Yes, but the hit is usually small and temporary. A lender's hard inquiry typically costs about 5 points, and the new account lowers your average account age. Rate-shopping with multiple lenders inside a 14–45 day window usually counts as a single inquiry with FICO. Over time, on-time payments on the new loan help your score.

What is a cash-out refinance?

A cash-out refinance borrows more than your remaining balance and pays you the difference in cash, often for renovations or debt payoff. This calculator models rate-and-term refinances only — changing your rate or term. Cash-out loans usually carry higher rates, and converting consumer debt into mortgage debt puts your home on the line, so evaluate that separately.

Is 2026 a good time to refinance?

It depends on the gap between your current rate and today's quotes, not on whether rates are high or low in absolute terms. If you locked below 3% in 2020–2021, no quote above that is worth taking. If you locked 7% or more in 2023–2024, rerun the numbers at every 0.75-point drop — using your real figures.

Sources and notes: The example rates on this page (7.5% and 6.25%) are illustrative demonstrations, not rate quotes — the rate a lender offers you appears on its official Loan Estimate. All payment results include principal and interest (P&I) only and exclude property taxes, homeowners insurance, and PMI. Related tools: FHA loan calculator, income tax calculator, and all finance calculators.

Disclaimer: This calculator provides informational estimates only and is not financial or loan advice. Refinancing decisions involve fees, taxes, and credit effects — consult a licensed mortgage professional before acting.