Refinance Calculator: method, checked example and practical limits
Compare an existing mortgage with a proposed refinance and calculate the closing-cost break-even point. The break-even month measures recovery of transaction costs, not an assurance of lower lifetime borrowing cost.
Inputs used by this calculator
Refinance Calculator uses the fields below. The starting values reproduce the page example; replace them with values from the same units and time period before using the result.
| Input | Starting example | Accepted value | How it is used |
|---|---|---|---|
| Current balance ($) | 300,000 | 0.01 to 1000000000000 | Supplies the current balance ($) quantity used by the published equation or result breakdown. |
| Current APR (%) | 7 | 0 to 100 | Supplies the current apr (%) quantity used by the published equation or result breakdown. |
| Current years remaining | 25 | 0.1 to 50 | Supplies the current years remaining quantity used by the published equation or result breakdown. |
| New APR (%) | 5.75 | 0 to 100 | Supplies the new apr (%) quantity used by the published equation or result breakdown. |
| New term (years) | 25 | 0.1 to 50 | Supplies the new term (years) quantity used by the published equation or result breakdown. |
| Closing costs ($) | 6,000 | 0 to 1000000000 | Supplies the closing costs ($) quantity used by the published equation or result breakdown. |
Inputs and measurement conventions
The quantities used on this page are Current balance ($), Current APR (%), Current years remaining, New APR (%), New term (years), Closing costs ($). Start with values for the same situation and read the units attached to each field. The field reference below shows supported choices and numerical limits.
A longer new term can lower installments while adding years of interest. Financed costs and principal changes require careful comparable inputs.
Method and equation
Compute current and proposed payments, then divide closing costs by positive monthly savings for a simple cash-flow break-even.
Refinance Calculator uses the following stated relationship: break-even=closing costs/(old payment−new payment). Its assumptions determine which question the answer can resolve.
break-even=closing costs/(old payment−new payment)Worked calculation with the starting values
Current balance ($): 300000; Current APR (%): 7; Current years remaining: 25; New APR (%): 5.75; New term (years): 25; Closing costs ($): 6000. These starting values give 25.74904127 months to recover closing costs. The calculation breakdown is Current payment: 2,120.337592; New payment: 1,887.319207; Monthly savings: 233.0183846; Current remaining payments: 636,101.2775.
A $300,000 balance is priced under the current and proposed terms before dividing costs by monthly savings.
Reading the answer
The break-even month measures recovery of transaction costs, not an assurance of lower lifetime borrowing cost.
Current payment: 2,120.337592; New payment: 1,887.319207; Monthly savings: 233.0183846; Current remaining payments: 636,101.2775. These intermediate quantities make the stated Refinance Calculator model inspectable; they should be read together with the main answer rather than treated as independent guarantees.
Common errors and model boundaries
A longer new term can lower installments while adding years of interest. Financed costs and principal changes require careful comparable inputs.
A lower payment can still extend debt and increase lifetime cost. Taxes, escrow, points and cash-out require separate inputs.
Independent verification and next decision
There is no positive payment-savings break-even, although another goal such as a shorter term may still matter.
For the Refinance Calculator method, compare break-even=closing costs/(old payment−new payment) with the starting inputs and the calculation table. The linked CFPB: mortgages and CFPB: Loan Estimate explainer references identify the relevant definitions, conventions or domain limitations. Retain intermediate precision when comparing a manually worked answer.
Refinance Calculator worked-example ledger
| Quantity | Example value | Role |
|---|---|---|
| Current balance ($) | 300000 | Entered assumption |
| Current APR (%) | 7 | Entered assumption |
| Current years remaining | 25 | Entered assumption |
| New APR (%) | 5.75 | Entered assumption |
| New term (years) | 25 | Entered assumption |
| Closing costs ($) | 6000 | Entered assumption |
| Main answer | 25.74904127 months to recover closing costs | Calculated from the starting inputs |
| Current payment | 2,120.337592 | Intermediate or contextual output |
| New payment | 1,887.319207 | Intermediate or contextual output |
| Monthly savings | 233.0183846 | Intermediate or contextual output |
| Current remaining payments | 636,101.2775 | Intermediate or contextual output |
| New payments plus costs | 572,195.7622 | Intermediate or contextual output |
Frequently asked questions
What if the new payment is higher?
There is no positive payment-savings break-even, although another goal such as a shorter term may still matter.
Which relationship does the Refinance Calculator use?
Compute current and proposed payments, then divide closing costs by positive monthly savings for a simple cash-flow break-even. The displayed relationship is break-even=closing costs/(old payment−new payment).
What do the starting values produce in the Refinance Calculator?
Current balance ($): 300000; Current APR (%): 7; Current years remaining: 25; New APR (%): 5.75; New term (years): 25; Closing costs ($): 6000. These starting values give 25.74904127 months to recover closing costs. The calculation breakdown is Current payment: 2,120.337592; New payment: 1,887.319207; Monthly savings: 233.0183846; Current remaining payments: 636,101.2775.
How should I interpret this Refinance Calculator answer?
The break-even month measures recovery of transaction costs, not an assurance of lower lifetime borrowing cost.
Which input mistake most affects the Refinance Calculator?
A longer new term can lower installments while adding years of interest. Financed costs and principal changes require careful comparable inputs.
What is outside this Refinance Calculator model?
A lower payment can still extend debt and increase lifetime cost. Taxes, escrow, points and cash-out require separate inputs.
What to keep in mind
A lower payment can still extend debt and increase lifetime cost. Taxes, escrow, points and cash-out require separate inputs.
Results are rounded for display in US format, with money in dollars and cents; CSV exports keep full calculation precision. This is a calculation summary, not an official certificate.