What a Refinance Calculator Helps You Decide
Refinancing replaces your existing loan with a new one. People refinance to lower the interest rate, reduce the monthly payment, shorten the payoff timeline, switch loan types, or access equity through cash-out. A refinance can be beneficial, but it is rarely “free.” Closing costs, points, fees, and the reset of the amortization clock can change the true cost. This Refinance Calculator is designed to make those tradeoffs visible by comparing your current loan against a proposed refinance with the same kind of month-by-month math lenders use.
The simplest refinance story is “my rate drops, my payment drops.” In practice, you also need to measure how much interest remains on the current loan, how much interest you would pay on the new loan, and how long it takes for monthly savings to recover the costs of refinancing. That is why this calculator focuses on three core outputs: monthly payment change, total interest change, and break-even time.
How Loan Payments Work in a Refinance Comparison
Most common consumer loans use amortization, which means each payment includes both interest and principal. Early in the term, interest is a larger portion of the payment. Later, principal becomes a larger portion. When you refinance, you often restart that pattern, especially if you extend the term. That can reduce the payment today while increasing total interest over the full horizon.
The refinance comparison starts with the remaining balance, remaining term, and current APR to estimate what the current payment should be. If you already know your exact current payment (for example from a statement), you can enter an optional override. The calculator then creates an amortization schedule to estimate total interest remaining. On the refinance side, it repeats the same calculation using the new APR and new term, adjusting for closing costs and points based on whether costs are paid upfront or rolled into the new loan.
Key Inputs That Change Refinance Results
Current balance and remaining term
Refinancing is most sensitive to your balance and how many months are left. A small rate reduction on a large balance can produce meaningful savings. But if you have only a short time remaining, there may not be enough months to recover costs before the loan is paid off.
New APR and new term
A lower APR reduces the interest portion of each payment, which can lower the payment and total interest. The term is just as important: a longer term can reduce the payment but increases the number of interest-bearing months. A shorter term often increases the payment but can dramatically reduce total interest and help you build equity faster.
Closing costs and how they are paid
Closing costs are a major reason refinance “savings” can be misleading. If you pay costs upfront, your monthly payment might look excellent, but you need to recover those costs through savings. If you roll costs into the loan, your upfront cash requirement is smaller, but you pay interest on a higher balance for years. This calculator models both approaches so you can see how the choice affects payment and total cost.
Points
Points are typically paid upfront as a percentage of the loan amount in exchange for a lower rate. They can be worth it if you plan to keep the loan long enough to recover the added cost. Points tend to make break-even longer, but they can reduce lifetime interest. A refinance offer with points should be judged by the full picture: upfront cost, monthly payment, and total interest.
Understanding Break-Even Months and Why It Matters
The break-even point is the moment when your cumulative savings from a lower monthly payment equals the upfront costs you paid to refinance. A common quick estimate is:
Break-Even = Upfront Costs ÷ Monthly Savings
This is useful because it answers a practical question: “How long do I need to keep this loan for the refinance to pay for itself?” If you expect to sell the home, move, refinance again, or pay off early before break-even, the refinance may not deliver the benefits the headline payment suggests.
Break-even is not the only metric. Some refinances can have a slow break-even but still reduce total interest substantially, especially when moving to a shorter term. Others can have a quick break-even but increase total interest if the term is extended significantly. That is why this tool also shows interest remaining vs interest on the new loan and the total cost difference.
Monthly Payment Savings vs Total Interest Savings
A refinance decision often depends on which outcome you care about most. If cash flow is the priority, reducing the monthly payment may be the main goal. If long-term cost is the priority, reducing total interest and paying off sooner may matter more. These goals sometimes conflict.
For example, refinancing into a longer term can produce large monthly savings but increase total interest. Refinancing into a shorter term can increase your payment but reduce interest and accelerate payoff. The calculator makes these tradeoffs explicit so you can choose based on your financial plan rather than a single number.
Cash-Out Refinance: When It Helps and When It Hurts
A cash-out refinance replaces your loan with a larger one and gives you the difference as cash. People use cash-out to consolidate high-interest debt, fund renovations, cover education costs, or build an emergency reserve. The benefit is that the new loan may have a lower rate than credit cards or personal loans. The cost is that you increase your long-term debt and may pay interest on that cash for many years.
The Cash-Out tab shows the new loan amount, monthly payment, and total interest with the cash-out included. It also estimates break-even versus a no-cash-out refinance at the same rate and term. If the cash-out is essential for a higher-value purpose and you can afford the payment, it can be a rational choice. If the cash-out is mainly for short-lived spending, it can create a long-term cost that is easy to underestimate.
What-If Scenarios: Extra Payments and Lump Sums
Refinancing is not the only way to reduce interest or shorten payoff. If your current loan has an acceptable rate but you want to reduce interest faster, extra payments can be powerful. Even small extra amounts can reduce the principal earlier, which lowers future interest. Lump sums can have a similar effect when applied to principal.
The What-If tab models extra monthly payments and a one-time lump sum so you can see payoff time and interest savings. This is helpful when deciding whether to refinance or simply accelerate payoff on the existing loan. If your refinance rate improvement is small and closing costs are high, extra payments might deliver a better risk-free “return” than refinancing.
How to Use This Refinance Calculator Step by Step
- Enter your current balance, current APR, and remaining months. Add a payment override only if you want to match a statement.
- Enter the new APR and new term you are considering.
- Add closing costs and points, then choose whether costs are paid upfront or rolled into the new loan.
- Review monthly savings, break-even months, break-even date, interest remaining vs new interest, and total cost difference.
- If cash-out is part of your plan, use the Cash-Out tab to model the bigger balance and payment.
- Use the Amortization Schedule tab to view the month-by-month breakdown and export to CSV.
Important Limitations to Keep in Mind
This calculator focuses on principal-and-interest comparisons using fixed-rate amortization. Real loans can include escrowed taxes and insurance, mortgage insurance, adjustable-rate features, and lender-specific fee structures. Some refinancing costs are prepaid items (such as escrow funding) that are not pure “cost,” while others are lender fees that are. Use your Loan Estimate or refinance worksheet to enter accurate costs.
If you want the closest estimate, use the exact loan amount, rate, term, points, and closing costs from your offer. Then compare multiple offers and test different term lengths. The goal is not to predict the future perfectly, but to make the decision more transparent and measurable.
FAQ
Refinance Calculator – Frequently Asked Questions
Answers to common questions about refinancing, break-even months, closing costs, points, cash-out, and schedules.
A refinance calculator estimates how refinancing changes your monthly payment, total interest, and overall cost. It compares your current loan against a new loan using balance, rates, term length, and closing costs to show savings and break-even time.
Break-even is typically estimated as total upfront refinance costs divided by monthly payment savings. If savings are not positive, break-even may not occur under the selected inputs.
Closing costs may include lender fees, appraisal, title, escrow, recording, and prepaid items. Some costs can be paid upfront or rolled into the new loan depending on the offer and lender rules.
Points are upfront fees expressed as a percentage of the loan amount, often paid to reduce the interest rate. Paying points increases upfront cost but can lower the monthly payment, changing the break-even timeline.
A longer term may reduce the monthly payment but can increase total interest. A shorter term may raise the payment but often reduces interest and pays off the loan faster. Compare scenarios using the term and schedule views.
A cash-out refinance replaces your current loan with a larger one and returns the difference to you as cash. The new balance includes the cash-out amount (and potentially rolled costs), which can increase payment and total interest.
Rolling costs reduces upfront cash required but increases the new loan balance and interest paid over time. Paying upfront can improve long-term cost but requires more cash at closing.
Results are estimates based on your inputs and standard amortization math. Real offers can differ due to lender pricing, taxes, insurance, escrow, discount points, program rules, and your credit profile.
Yes. The schedule tab builds an amortization table and supports CSV export for spreadsheet analysis.