Refinance Calculator

How to Use Our Refinance Calculator

To get the most accurate results, it helps to understand what each number means. Here is a simple guide to filling out the calculator.

1. Enter Current Loan Details: This is the starting point. You'll need your most recent mortgage statement to find this info.
   • Remaining Loan Balance: This is the total amount you still owe on your mortgage. It's often called the "principal balance."
   • Current Interest Rate: Enter the rate you are paying right now. This is crucial for calculating your current payment and total interest.
   • Remaining Loan Term: This is the number of years left on your loan. If you are 5 years into a 30-year mortgage, you have 25 years remaining.
2. Provide New Loan Offer: This is the information you get from a lender when you ask for a quote, often found on a "Loan Estimate" document.
   • New Interest Rate: The new, hopefully lower, rate the lender is offering you.
   • New Loan Term: The length of the new loan, typically 15 or 30 years. Be careful! A new 30-year loan will restart your payment clock (see our 'Mistakes' section).
   • Closing Costs: This is the one-time fee to create the new loan. It includes appraisal, title, and lender fees. A good estimate is usually 2-5% of the new loan amount.
3. Add Cash Out (Optional): If you are doing a "cash-out" refinance to borrow extra money, enter that amount here. The calculator will add this to your new loan balance. If you are not taking cash out, leave this at $0.
4. Select Closing Cost Option: This is a key decision.
   • Roll costs into new loan: If you check this box (the most common choice), the closing costs are added to your new loan principal. You pay nothing upfront, but you will pay interest on the costs.
   • Pay costs upfront: If you uncheck this box, the calculator assumes you will pay the closing costs out of your own pocket in cash. This lowers your new loan balance but requires you to have the cash on hand.
5. Analyze Your Results: As soon as you enter your details, the summary at the top will update instantly. This shows your new payment, your monthly savings, your lifetime savings, and the all-important 'break-even point' to help you make your decision.

Understanding Your Refinance Results

Your results are designed to give you a complete financial picture. The 'New Monthly Payment' shows the new principal and interest you'll pay, while 'Monthly Savings' highlights the immediate change in your monthly budget. This is the most direct impact of your refinance.

The 'Break-Even Point' is one of the most important metrics. It tells you exactly how many months it will take for your 'Monthly Savings' to completely cover your 'Closing Costs'. If you plan to stay in your home longer than this break-even period, the refinance is typically a strong financial win.

Finally, 'Lifetime Savings' looks at the big picture, comparing the total interest you'll pay on the new loan versus your current one (factoring in closing costs). This number shows the long-term benefit or cost of the change. The charts below provide a visual story, showing how your loan balance will decrease over time and comparing the total interest paid head-to-head.

Common Refinancing Mistakes to Avoid

Getting a good refinance deal is exciting, but it's easy to get lost in the numbers. Many people focus only on the interest rate and miss other details that can cost them thousands. Here are the most common traps to watch out for.

Mistake 1: Fixating on Rate, Forgetting Closing Costs

It's tempting to refinance for a 0.25% rate drop, but this can be a costly error. Your lender charges fees (closing costs) to create the new loan. If these costs are $5,000, that 0.25% saving might only be $50 a month. It would take you 100 months (over 8 years!) just to break even. Always use the 'Break-Even Point' in this calculator. If you plan to move before you break even, you will lose money on the deal.

Mistake 2: Restarting Your 30-Year "Loan Clock"

This is the most common and expensive trap. Imagine you're 10 years into a 30-year mortgage. You have 20 years left. You refinance to a new 30-year loan to get a lower payment. You've just reset your loan clock and stretched 20 years of payments back into 30. You will almost certainly pay tens of thousands more in total interest over the life of the loan. A lower payment is nice, but don't buy it by extending your debt by a decade.

Mistake 3: Taking the First Offer (Even From Your Current Lender)

Lenders are not all the same. Their rates and, more importantly, their fees can be wildly different. Don't just accept the first offer you get, even if it's from your current, trusted bank. They're counting on you not to shop around. The single best way to save is to get an official Loan Estimate from at least three different lenders—like a bank, a credit union, and a mortgage broker. Comparing these is the only way to know you're getting a truly good deal.

Mistake 4: Turning "Unsecured" Debt into "Secured" Debt

It sounds smart to pay off high-interest credit cards with a low-interest cash-out refinance. But be very careful. Credit card debt is 'unsecured'—if you fail to pay, it damages your credit. Mortgage debt is 'secured' by your house. When you roll that credit card debt into your mortgage, you have just put your home on the line as collateral. If you hit financial trouble, you could face foreclosure over what started as credit card bills. Think of this as a last resort, not a first choice.