A refinance savings calculator helps homeowners determine whether refinancing their mortgage makes financial sense. By comparing your current loan with a new loan's lower rate, you can see monthly savings, how long to break even on closing costs, and total lifetime savings.
How to Use This Calculator
- Enter your current loan balance, remaining term, and current interest rate.
- Enter the new interest rate and new loan term.
- Enter estimated closing costs for the refinance (typically 2–5% of loan balance).
- Click Calculate to see monthly savings, break-even point in months, and total interest savings.
What This Calculator Measures
- Monthly savings — Difference between old and new monthly principal + interest payments.
- Break-even point — Months needed to recoup closing costs from monthly savings.
- Total interest savings — Total interest paid on old loan minus total interest on new loan over the remaining period.
- Net savings — Total interest savings minus closing costs — your true bottom-line benefit.
Formula or Logic
Monthly Savings = Old Monthly Payment − New Monthly Payment
Break-Even (months) = Total Closing Costs ÷ Monthly Savings
Total Interest Savings = (Total interest remaining on old loan) − (Total interest on new loan)
Example Calculations
Example 1: Remaining balance $280,000 at 7.25%, 25 years remaining. Refi to 6.0%, 30 years. Old payment = $2,025. New payment = $1,678. Monthly savings = $347. Closing costs = $6,000. Break-even = 17 months. If staying 10+ years, total savings ≈ $35,000.
Example 2: Refi same balance into a 15-year at 5.8%. Payment increases $200/month but total interest saved = $120,000 over full term.
Understanding Your Results
If your break-even is under 24 months and you plan to stay in the home, refinancing is likely worthwhile. If you're moving in 2–3 years, you may not break even. Rate reductions of 0.75% or more typically justify the cost.
Common Mistakes to Avoid
- Refinancing repeatedly and resetting to a 30-year term, which maximizes lifetime interest paid.
- Not accounting for closing costs — "no-cost" refis usually roll costs into the rate or loan balance.
- Ignoring the tax implications — mortgage interest deduction changes affect net savings.
- Forgetting that extending the loan term may lower payments but increase total interest paid significantly.