Refinance Savings Calculator
Calculate how much refinancing your mortgage saves you.
Compare old vs new loan payments, break-even point, and total interest savings.
Refinance savings calculation compares your current mortgage payment against a new one, then factors in closing costs to determine how long it takes to break even.
Core formulas:
Monthly Savings = Old Payment − New Payment
Break-Even Months = Total Closing Costs / Monthly Savings
Each monthly payment is calculated using standard amortization: M = P × [r(1+r)^n] / [(1+r)^n − 1]
Worked example: Current loan: $320,000 remaining at 7.25%, 27 years left → Payment = $2,213/month New loan: $320,000 at 5.75%, 30-year term → Payment = $1,868/month Monthly savings: $2,213 − $1,868 = $345/month Closing costs (typical 2–3%): $320,000 × 2.5% = $8,000 Break-even: $8,000 / $345 = 23.2 months (~2 years)
If you plan to stay in the home more than 2 years, refinancing makes financial sense.
Closing cost components to include:
- Origination fee: 0.5–1% of loan
- Appraisal: $400–$700
- Title search and insurance: $500–$1,500
- Recording fees: $50–$200
- Prepaid interest (prorated days)
Factors that affect the decision:
- Remaining term: Resetting to 30 years from a 27-year loan means 3 extra years of payments — your total interest paid may increase even with a lower rate
- Rate drop threshold: A common rule of thumb is to refinance only if you reduce your rate by at least 1% — but even 0.5% can be worth it on large balances
- Cash-out refinance: Increases principal and interest paid — calculate separately
- No-closing-cost refi: Higher rate offsets the savings — usually worse long-term