How to Use the Refinance Calculator
Whether you’re exploring your first refinance or comparing multiple scenarios, this calculator helps you see what a new loan might mean for your monthly budget and long-term finances. Here’s how to get the most accurate results.
Original Mortgage Section
This section captures the details of your current home loan. The more accurate your information, the better your comparison will be.
Original loan amount
This is the amount you borrowed when you first purchased your home or last refinanced—not what you owe today. You can find this on your original closing documents or loan statement.
Appraised value
Enter your home’s value at the time you took out your current loan, not what it’s worth today. The calculator uses this to determine if you’re currently paying private mortgage insurance (PMI), which affects your monthly payment and overall savings.
Original interest rate
This is the rate on your current mortgage. You’ll find it on your most recent mortgage statement or in your loan documents. Even a small difference here—say, 6.5% versus 6.0%—can significantly change your refinance savings.
Term in years
Select whether your current loan is a 30-year or 15-year mortgage. This affects how your balance has amortized over time.
Years remaining
How many years are left until your current mortgage is paid off? If you’re not sure, check your most recent statement or subtract the years you’ve been paying from your original term. For example, if you’re 5 years into a 30-year mortgage, you have 25 years remaining.
Income tax rate
Your federal income tax bracket matters because mortgage interest is tax-deductible for many homeowners. When you refinance to a lower rate, your interest deduction decreases, which can slightly reduce your net savings. If you’re unsure of your rate, a rough estimate is fine—most homeowners fall between 12% and 24%.
New Mortgage Section
Here’s where you’ll model your potential refinance. You can adjust these fields to compare different scenarios and see how each choice impacts your finances.
Auto-calculate balance
Check this box to let the calculator determine your current loan balance based on your original loan details and payment history. If you’d rather use your exact current balance from your latest statement, leave this unchecked and enter the amount manually.
Loan balance
If you didn’t auto-calculate, enter what you owe today. This is the amount you’ll be refinancing. You’ll find this on your most recent mortgage statement, typically labeled “principal balance” or “unpaid balance.”
Appraised value
This is your home’s current market value—not what you originally paid for it. You can use a recent appraisal if you have one, or estimate based on comparable sales in your area. This number determines your loan-to-value ratio (LTV), which affects your rate and whether you’ll need to pay PMI on the new loan.
Interest rate
Enter the rate you’ve been quoted for your new loan, or use an estimated rate based on current market conditions. Changing this field by even 0.25% can show you how rate shopping impacts your savings.
Term in years
Choose between a 30-year or 15-year mortgage. A shorter term means higher monthly payments but less total interest paid over time. A longer term reduces your monthly payment but increases your overall interest cost.
Loan origination rate
This is the percentage of your loan amount that the lender charges as an origination fee—typically ranging from 0% to 1% of the loan. For example, a 0.5% origination fee on a $300,000 loan would cost $1,500. Some lenders don’t charge origination fees at all, while others build this cost into their rate structure.
Points paid
Discount points are upfront fees you can pay to lower your interest rate—typically, one point equals 1% of the loan amount and reduces your rate by about 0.25%. If you’re not planning to pay points, leave this at zero.
Other closing costs
Include all other fees associated with refinancing: appraisal, title insurance, attorney fees, recording fees, and lender charges. A typical refinance runs 2 – 5% of the principal balance in closing costs, though this varies by location and lender. Your lender should provide a loan estimate that breaks down these costs.
Optional Fields
Do NOT include PMI
PMI (private mortgage insurance) is typically required if your loan-to-value ratio is above 80%. The calculator automatically determines if PMI applies based on your loan balance and appraised value. Check this box only if you know you won’t need PMI—for instance, if your lender waives it.
Include taxes and insurance
Check this to see your full monthly housing payment, including property taxes and homeowners insurance. This gives you a more complete picture of your true monthly costs. If you’re only interested in comparing principal and interest payments, leave this unchecked.
Understanding Your Results
Once you hit “Calculate,” you’ll see a side-by-side comparison of your current and new mortgage, plus a refinance break-even analysis that tells you when the refinance pays for itself.
Monthly payment comparison
This shows how much your monthly payment would change. A lower payment frees up cash flow for other priorities. A higher payment (common when moving to a 15-year term) means you’re building equity faster and paying less interest overall.
Interest rate
The rate difference between your old and new loan. Generally, the more you can lower your rate, the more you’ll save—but even smaller rate reductions can make sense, especially on larger loan balances where each percentage point translates to significant dollar savings.
Total interest
This shows the complete interest picture: what you’ve likely already paid on your current loan plus what you’ll pay on the new loan from this point forward. This total view is especially important when choosing your new loan term.
While refinancing can lower your rate, it may increase your total finance charges over the life of the loan—particularly if you’re extending your term and paying interest over a longer period. For example, refinancing from a loan with 20 years remaining to a new 30-year mortgage means you’re adding 10 years of interest payments, even at a lower rate.
Total repayment
The full amount you’ll pay back—principal plus interest from both loans—until the loan is paid off. This helps you see the true cost of each loan option.
Final payment
The date your mortgage will be paid in full. Refinancing to a new 30-year loan pushes this date further out, while switching to a 15-year term brings it closer.
Break-even analysis
This tells you how long it takes for your monthly savings to exceed your closing costs. If your break-even point is 24 months and you plan to stay in the home for at least that long, refinancing likely makes financial sense.
Total remaining payments over time
This chart compares when you’ll pay off your mortgage under each loan scenario. If you’re extending your term, you’ll see the refinanced loan’s line stretch out further than your current loan—a visual reminder that lower monthly payments often mean more years of payments. The chart also shows your cumulative costs over time and highlights when you break even on your closing costs.
Total closing costs
The upfront cost to complete the refinance. This is the hurdle your monthly savings need to clear for the refinance to be worthwhile.
Making Smart Refinancing Decisions
The calculator gives you the numbers—but how do you decide if refinancing is the right move? Here are some rules of thumb and considerations that can guide your decision.
The Break-Even Rule
Your break-even point is the single most important number in your refinance decision. It tells you how many months you need to stay in the home for the refinance to pay off.
As a general guideline:
- Break-even under 2 years: Strong candidate for refinancing, especially if you plan to stay in the home long-term.
- Break-even 2–4 years: Still makes sense for most homeowners who aren’t planning to move soon.
- Break-even over 5 years: Proceed with caution. You need to be certain you’ll stay in the home long enough to recoup your costs.
Keep in mind that life is unpredictable. If there’s a chance you might move, get a new job in another city, or downsize in the next few years, a longer break-even period becomes riskier.
Short-Term Savings vs. Long-Term Costs
One of the most common refinance scenarios is extending your loan term to lower your monthly payment. For example, if you have 20 years left on your current mortgage, refinancing to a new 30-year loan can significantly reduce your monthly payment—but at a cost.
Why it happens: Even if you get a lower interest rate, spreading payments over 30 years instead of 20 means you’re paying interest for 10 additional years.
When it makes sense:
- You need immediate cash flow relief due to a job change, medical expenses, or other financial strain
- You plan to invest the monthly savings in something with a higher return than your mortgage rate
- You want flexibility and plan to make extra payments to pay off the loan early anyway
When to reconsider:
- You can comfortably afford your current payment
- You’re already well into your mortgage (say, 10+ years in)
- Your primary goal is building equity and eliminating debt
The calculator shows you exactly how much extra you’ll pay in total interest by extending your term. Use that number to decide if the monthly relief is worth the long-term cost.
Rate Reductions: How Much Is Enough?
Old advice said you should only refinance if you can drop your rate by at least 1%. That’s outdated. Today, even a 0.5% reduction can make sense—especially if your closing costs are low or you plan to stay in the home for many years.
What matters more than the rate drop itself is the relationship between:
- Your monthly savings
- Your closing costs
- Your timeline
Run multiple scenarios in the calculator. Compare a 0.5% reduction to a 0.75% or 1% drop. See how the break-even point changes. That comparison will tell you whether it’s worth waiting for a better rate or moving forward now.
Shortening Your Loan Term
Refinancing from a 30-year to a 15-year mortgage is one of the best ways to build wealth through your home. You’ll typically get a lower interest rate (15-year loans almost always have better rates than 30-year loans), pay off your home faster, and save enormous amounts in interest.
The trade-off? Higher monthly payments.
Before committing to a 15-year term, ask yourself:
- Can I comfortably afford the higher payment, even if my income drops or expenses increase?
- Do I have adequate emergency savings (at least 3–6 months of expenses)?
- Am I sacrificing other financial goals, like retirement savings or paying off high-interest debt?
If you answer yes to all three, a 15-year refinance can be a powerful financial move.
When Not to Refinance
Sometimes the numbers look good on paper, but refinancing still isn’t the right choice:
- You’re planning to move soon: If you’re not confident you’ll stay past your break-even point, skip it
- Your credit has dropped: You might not qualify for a rate low enough to justify the costs
- Your home value has declined: If your home is worth less than you owe or your equity is minimal, you may not qualify or may have to pay PMI
- You’re nearing retirement: Taking on a new 30-year mortgage in your 50s or 60s may not align with your goal of entering retirement debt-free
Shopping for the Best Deal
Closing costs can vary significantly between lenders—sometimes by thousands of dollars. The same goes for interest rates.
Get quotes from at least three lenders. Compare not just the rate, but:
- Lender fees and origination charges
- Third-party costs like title insurance and appraisal fees
- Whether the lender offers closing cost credits
Use the calculator to model each offer. Sometimes, a slightly higher rate with lower closing costs results in a better deal, especially if your break-even point is shorter.
Final Thoughts
Refinancing is a powerful financial tool, but it’s not a one-size-fits-all decision. The calculator gives you the data—monthly savings, break-even timeline, total costs—but you need to factor in your personal situation: how long you plan to stay in the home, your financial goals, and your comfort level with your monthly payment.
Take your time. Run different scenarios. And when you’re ready, reach out to a lender to get a firm quote and make your move.
Ready to explore your refinance options? Get started with Refi.com today.