Refinance Calculator

Refinancing swaps a known cost — the closing costs — for an uncertain benefit: the monthly saving, for as long as you keep the loan. Divide the total closing costs by the monthly saving and you get the break-even point in months. Stay past it and the refinance pays; move or refinance again before it and you have lost money.

Closing costs on a refinance typically run 2–5% of the loan amount, covering origination, appraisal, title insurance, recording and prepaid escrow. A $300,000 refinance costing $6,000 that saves $190 a month breaks even in about 32 months.

The saving shown by most refinance calculators compares your current payment to a brand-new 30-year payment. If you are eight years into a 30-year mortgage, refinancing into another 30-year term means paying for 38 years in total — and the first years of the new loan are almost entirely interest again.

The fix is to refinance into the remaining term rather than a fresh 30. A lender will usually write a 22-year loan if you ask. The payment saving is smaller, but the total-interest saving is the one that matters, and it is often the difference between a genuinely good refinance and a break-even one.

A rate-and-term refinance replaces the loan with a cheaper one and changes nothing else. A cash-out refinance increases the balance and hands you the difference. Lenders price them differently: cash-out carries a rate premium, tighter loan-to-value limits and stricter underwriting, because the risk profile is worse.

Cash-out can be rational — consolidating 22% credit card debt into a 7% mortgage is a real saving — but it converts unsecured debt into debt secured on your home, and it stretches a five-year problem across thirty years. Model the total interest on the consolidated balance, not just the payment relief.

A no-closing-cost refinance means the lender pays the costs and recovers them by charging a higher interest rate, or by adding them to the balance. Neither is free; the cost is simply moved somewhere you will not see it on the settlement statement.

They can still be the right choice if you expect to move within a few years, because a higher rate for three years costs less than $6,000 of closing costs paid up front. Ask the lender to quote both structures on the same day and compare the total paid over the period you actually expect to hold the loan.

If your loan carries PMI and your home has appreciated, a refinance can remove it even when the rate barely improves. PMI on a $300,000 loan commonly runs $100–$250 a month, so eliminating it can justify the transaction on its own.

Before refinancing for that reason alone, check whether your servicer will simply cancel PMI on request. Conventional loans must drop it automatically at 78% loan-to-value based on the original amortisation schedule, and most servicers will cancel at 80% on request with a new appraisal — far cheaper than a full refinance.