Mortgage Refinance Calculator

How to use Refinance Calculator

1. 1
   Enter what is left. The outstanding balance and the months remaining, not the original loan amount or term.
2. 2
   Add the new rate and term. Keeping the same number of months left is the honest comparison. Extending resets the clock.
3. 3
   Read the break-even and the lifetime figure. The first says when the costs are recovered. The second says whether the deal is actually cheaper.

About refinancing a mortgage

Refinancing is usually decided on the wrong number. The monthly payment is what a lender leads with, and it is the figure most easily improved by something that costs you money — extending the term. A loan with twenty-five years left, refinanced into a fresh thirty, will almost always show a lower payment even at a worse rate, because the same balance is being spread over sixty more months. That is not a saving; it is a rescheduling, and the interest it adds is invisible in the only number most comparisons show. The honest comparison keeps the term constant: put the months you have left into the new term, see what the payment becomes, and take the difference as the real monthly gain. Break-even then answers the question that actually matters, which is not whether the rate is lower but whether you will hold the loan long enough for the closing costs to be repaid. Below about eighteen months the costs are recovered quickly enough that the decision is easy. Past sixty months it depends entirely on a prediction about your own life, and most people move or refinance again sooner than they expect. The lifetime figure here includes the closing costs in the new loan deliberately, because a comparison that omits them makes every refinance look better than it is. One thing no calculator can price: a rate that is already low is an asset. Giving up a very cheap fixed rate to release equity or shorten a term is a real trade, and the saving on paper may not survive it.

Frequently asked questions