This Refinance Calculator helps determine potential savings from refinancing a mortgage. It accounts for factors such as taxes and private mortgage insurance (PMI) to provide a precise estimate of savings. It also calculates the break-even point for various costs, showing how quickly up-front refinancing costs can be recovered. Enter details from the current mortgage in the top section and the refinancing details in the "new mortgage" section below. If needed, PMI is calculated automatically. Use the sliding scales to observe how changes in interest rate, loan term, discount points, closing costs, or other factors affect savings.

Definitions

Original mortgage amount
The original amount of the mortgage.

Appraised value
The home’s appraised value at the time of purchase.

Current interest rate
The annual interest rate on the original loan.

Current term in years
The total length of the current mortgage in years.

Years remaining
The number of years left on the current mortgage.

Income tax rate
The current income tax rate. Use the ‘Filing Status and Federal Income Tax Rates on Taxable Income’ table to estimate the federal tax rate.

Filing Status and Federal Income Tax Rates on Taxable Income for 2024*

*Caution: Do not use these tax rate schedules to calculate 2023 taxes. Use only for 2024 estimates. Source: Rev. Proc. 2023-34.

Calculate balance
To let the calculator determine the remaining balance based on original loan details and years remaining, check this box. To enter a custom amount, leave the box unchecked.

Current appraised value
The home’s current appraised value.

Loan balance
The remaining mortgage balance to be refinanced.

New interest rate
The annual interest rate on the new loan.

New term in years
The number of years for the new loan.

Loan origination rate
The percentage of the new mortgage paid to the lender as the loan origination fee. Typically, this fee is 1% of the loan balance.

Points paid
The number of points paid to the lender to reduce the mortgage’s interest rate. Each point costs 1% of the new loan amount.

Other closing costs
The estimated total of all additional closing costs, including filing fees, appraiser fees, and other miscellaneous expenses.

Monthly PMI payment
The monthly cost of Private Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of the loan balance per year. Monthly PMI is calculated by multiplying the initial loan balance by this percentage and dividing by 12. When home equity exceeds the required percentage for PMI, PMI payments drop to zero.

PMI is generally required for home equity below 20%. However, for refinanced loans guaranteed by Freddie Mac or Fannie Mae, PMI may not be necessary if it was not required on the current mortgage. Confirm with the lender for details. If applicable, check the box "do NOT include PMI."

Current payment
The sum of principal, interest, and PMI on the existing loan. Insurance and taxes are not included, as refinancing does not affect them.

New payment
The sum of principal, interest, and PMI for the refinanced loan.

Monthly PI payment
The monthly principal and interest payment.

Break-even monthly payment savings
The number of months required for the monthly payment reduction to exceed closing costs.

Break-even PMI & interest savings
The number of months required for savings on interest and PMI to exceed closing costs.

Break-even total savings after-tax
The number of months required for after-tax interest and PMI savings to surpass closing costs.

Break-even total savings vs. prepayment
The most conservative break-even measure. It calculates the number of months needed for after-tax interest and PMI savings to exceed both closing costs and potential interest savings from prepaying the mortgage. The prepayment amount in this calculation equals the amount spent on closing costs.

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About Mortgage Refinancing

Many homebuyers who take out a 30-year mortgage eventually refinance their loan at some point—unless they sell their home and move elsewhere first.

This has been especially common in recent years, as falling mortgage rates have allowed borrowers to save money by refinancing at a lower rate. However, lowering the interest rate is not the only reason to refinance. Here are some of the most common reasons borrowers choose to refinance a mortgage:

• To secure a lower mortgage rate

• To pay off the loan faster by refinancing to a shorter term (often at a lower rate)

• To reduce monthly payments by extending the loan term

• To switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan

• To borrow against home equity through a cash-out refinance

• To remove a person’s name from the loan, such as in the case of a divorce

This calculator is designed to assist with the first three scenarios. It calculates monthly payments and potential savings from refinancing and determines the additional cost over time if the loan term is extended.

Refinancing replaces an existing mortgage with a new one. The process involves the same steps and documentation as obtaining the original mortgage, including the approval process. Once approved, the new mortgage pays off the old loan, and the borrower continues forward with the new loan terms.

Deciding Whether to Refinance

The key question in refinancing is whether it makes financial sense. Important factors to consider include:

• How much will monthly payments decrease?

• How long will it take for savings to exceed refinancing closing costs?

• Is it possible to afford a shorter loan term?

• Will extending the loan term result in higher long-term costs?

This calculator helps answer these questions.

Using the Mortgage Refinance Calculator

The calculator consists of two main sections.

1. Original Mortgage: Enter the details of the current mortgage. The “appraised value” should reflect the home’s value at the time of purchase or when the loan was obtained, not its current value. The calculator uses this to determine if mortgage insurance is currently required.
   
   Refinancing at a lower interest rate reduces the mortgage interest deduction, affecting overall savings. The calculator considers this impact, which is why it requests the income tax rate.
   
   

2. New Mortgage: Enter the current loan balance or allow the calculator to estimate it based on regular amortization, assuming no extra or late payments.
   
   

• The “loan origination rate” is the percentage of the loan amount charged by the lender for originating the loan.

• Additional closing costs should be entered in the “other costs” box.

After inputting the details, clicking “calculate” will generate the new monthly payment and total savings over the loan’s duration. The “View report” button provides a detailed breakdown of savings and the new mortgage terms.

Refinance Break-Even Calculator

https://refi.com/calculator/refinance-breakeven-calculator/

 

Refinance Break-Even Calculator

Refinancing a mortgage can be a smart financial move if you secure a lower interest rate than your current one. However, refinancing comes with costs—closing costs typically range from 2% to 6% of the loan amount. So, how do you determine if refinancing saves you enough money to justify those costs?

This Refinance Break-Even Calculator helps you figure out how long it will take for the savings from a lower mortgage rate to offset your refinancing costs. It also considers tax deductions and whether paying for discount points is beneficial.

Key Definitions

Original Mortgage

• Original mortgage amount – The initial loan amount.

• Appraised value – The home’s appraised value at the time of purchase.

• Current interest rate – The annual interest rate on the original loan.

• Current term (years) – The total length of the original mortgage.

• Years remaining – The remaining years left on the current mortgage.

• Income tax rate – Your current tax bracket based on federal income tax rates.

Federal Income Tax Brackets for 2024

(Use these only for 2024 estimates; not for filing 2023 taxes.)

New Mortgage Details

• Calculate balance – Check this box if you want the calculator to estimate your remaining loan balance based on the original loan details. Otherwise, manually enter your current balance.

• Current appraised value – Your home’s present appraised value.

• Loan balance – The remaining balance on your mortgage that will be refinanced.

• New interest rate – The annual interest rate for the refinanced loan.

• New term (years) – The length of the new mortgage.

• Loan origination rate – The lender’s fee for originating the loan, usually around 1% of the loan amount.

• Points paid – The number of discount points purchased to lower the interest rate. Each point equals 1% of the loan amount.

• Other closing costs – Additional lender fees, including filing and appraisal fees.

• Monthly PMI payment – The cost of Private Mortgage Insurance (PMI). If your equity is below 20%, PMI is typically required, estimated at 0.5% of the loan balance per year.

(For loans backed by Freddie Mac or Fannie Mae, PMI may not be required if it wasn't on the original mortgage. Check with your lender.)

Payment Calculations

• Current payment – Principal, interest, and PMI on your current mortgage. Taxes and insurance are not included.

• New payment – Principal, interest, and PMI under the refinanced loan terms.

• Monthly PI payment – Principal and interest only (excluding PMI).

Break-Even Calculations

This calculator provides four break-even points:

1. Break-even on monthly payment savings – The number of months it takes for the reduced monthly mortgage payment to offset closing costs.

2. Break-even on PMI & interest savings – The time required for savings on PMI and interest to surpass closing costs.

3. Break-even on total savings after taxes – Accounts for changes in your mortgage interest tax deduction.

4. Break-even on total savings vs. prepayment – The most conservative measure, factoring in how much you’d save by using closing costs to prepay your original mortgage instead of refinancing.

If your refinanced mortgage has a shorter term than your remaining years on the original loan, savings will be reflected in the “Total remaining payments” box.

Click "View report" for a detailed comparison of your original and refinanced mortgage.

Refinance Break-Even Calculator Overview

When Should You Refinance?

A common rule of thumb is that refinancing should lower your mortgage rate by at least 1%. However, the key factor is how quickly you recover your closing costs compared to how long you plan to keep the loan.

For example:

• A 1% rate reduction might allow you to recoup closing costs within four years, making refinancing worthwhile.

• If you plan to move within three years, you may not break even before selling your home.

• A refinance that takes eight years to break even offers little benefit unless you plan to stay in your home long-term (e.g., 20+ years).

Tax Considerations

Many homeowners don’t account for tax implications when refinancing. If you itemize deductions, you may currently deduct mortgage interest. Refinancing to a lower rate reduces this deduction, increasing your taxable income. The calculator can factor this into your break-even analysis.

Using the Refinance Break-Even Calculator

1. Enter "Original mortgage" details, including the appraised home value at the time of purchase. This determines whether PMI applies.

2. Input your tax bracket under “Income tax rate.”

3. Provide "New mortgage" details, including:

• Your current balance (or allow the calculator to estimate it).

• The loan origination fee percentage (up to two decimal places).

• Points paid (if any) to reduce the interest rate.

• Additional lender fees.

4. PMI is factored in automatically, but you can uncheck the box to remove it from calculations.

Once complete, the calculator will display four break-even points, allowing you to assess whether refinancing makes financial sense for your situation.

Click “View report” for a full loan comparison and detailed breakdown.

Refinance Break-Even Rule of Thumb

You may have heard different rules of thumb about refinancing, but determining your break-even point is one of the most crucial steps in the refinance process. Several factors impact this, including bank fees, third-party costs, and escrow charges.

Use our Refinance Break-Even Calculator to find out how long it will take for your savings to offset the refinancing costs. Before proceeding, ensure that the additional time required to repay the loan does not outweigh the savings you will gain.

How to Calculate the Recoup of Closing Costs

To determine how long it will take to recover your closing costs, follow these steps:

1. Calculate the increase in your loan balance due to refinancing fees and closing costs.

2. Determine your monthly savings by comparing your new mortgage payment (principal and interest) to your current payment.

3. Divide your total closing costs by your monthly savings to find the number of months it will take to break even.

For example, if your closing costs total $5,000 and you save $150 per month on your new mortgage payment:

5,000÷150=33.3 months(orapproximately2.8years)5,000 \div 150 = 33.3 \text{ months} (or approximately 2.8 years)

This means it will take about 33 months to recoup your closing costs through monthly savings.

About FedCutRates.net

At FedCutRates.net, we believe that knowledge is power—especially when it comes to making important financial decisions. That’s why we provide free tools and calculators to help you research and evaluate the best refinancing options for your needs.

Refinancing can feel complex and overwhelming, but we make it easier by offering clear, in-depth information so you can make informed choices with confidence.

Our team of experts is here to guide you, whether you’re looking to:
✅ Lower your monthly payments
✅ Shorten your loan term
✅ Secure a better interest rate

No matter your goal, we provide the resources, insights, and expertise to help you make the smartest financial move.

Let’s take the next step toward a better mortgage and a brighter future—together!

FedCutRates.net Editorial Standards

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Meet Our Editorial Team

Alex Carter leads our editorial team. With over a decade in the mortgage industry, Alex has helped countless families navigate home purchases and refinancing. He has also contributed to well-known financial publications and has been cited as an expert in industry-leading outlets like U.S. News and Realtor.com.

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• Fannie Mae Selling Guide

• Freddie Mac Seller/Servicer Guide

• HUD’s FHA Single Family Housing Policy Handbook 4000.1 (Nearly 2,000 pages)

• Department of Veterans Affairs Lender Handbook

• USDA’s Guaranteed Loan Program Technical Handbook HB-1-3555

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