How Mortgage Amortization Works (and How Extra Payments Save Thousands)
See how each mortgage payment splits between interest and principal, why early payments are mostly interest, and how small overpayments shorten the loan.
Read the guideRefinance Calculator
Estimate monthly savings, break-even timing, and compare payment impact before refinancing.
Monthly savings$0Difference between current and proposed payment
Current payment$0
New payment$0
Break-even—
Closing costs$0
Refinance insights
This refinance page now includes a clean summary card and chart view for easier lead capture or print-to-PDF workflows.
How to judge a refinance
Refinancing replaces your current mortgage with a new loan at a different rate. This calculator compares the two payments over the same remaining term, so the saving you see comes from the rate alone, and shows how many months it takes for that saving to repay your closing costs.
Keeping the term the same is deliberate. A new 30-year loan can make almost any refinance look attractive on the monthly payment while adding years of interest.
Worked example with the default values
You owe $260,000 with 25 years left at 7.1%. A new loan at 6.1% over the same 25 years costs $4,500 to arrange.
- Current payment: $1,854.25 a month
- New payment: $1,691.11 a month
- Monthly saving: $163.13
- Break-even: $4,500 ÷ $163.13 = 27.6 months
If you keep the new loan for the full 25 years, the lower payment adds up to about $48,900, before subtracting the $4,500 of costs. If you might sell within about two and a half years, this refinance would lose money.
What decides whether it is worth it
- How long you will keep the loan. It must comfortably exceed the break-even point.
- All of the closing costs, including appraisal, title, lender fees and any points paid to lower the rate.
- The size of the balance. A one-point rate cut saves far more on $400,000 than on $100,000.
- Your remaining term. Late in a loan most of each payment is already principal, so the saving is smaller.
Want the full explanation? Read our guide: When Does Refinancing Make Sense? The Break-Even Rule.
How to use the Refinance Calculator
- Enter the main housing cost inputs and any recurring costs you expect to pay.
- Check the result against your monthly budget, not just lender affordability rules.
- Compare ownership scenarios before making a long-term commitment.
Refinance break-even method
Monthly savings = old payment − new payment; break-even months = refinance costs ÷ monthly savings
- Old payment: Current monthly payment
- New payment: Estimated refinanced payment
- Costs: Closing or refinance costs
A refinance looks stronger when the break-even point arrives well before you expect to move or refinance again.
Quick planning notes for the Refinance Calculator
Estimate monthly savings and break-even period after refinancing. Start with a realistic baseline, then change one input at a time to see how the result moves. That makes it easier to compare scenarios and spot the trade-offs that matter most.
Housing decision tips
- Test multiple down payment and term combinations instead of relying on a single monthly payment estimate.
- Remember that taxes, insurance, maintenance, and closing costs can materially change the real cost of ownership.
- Compare the result with refinancing, DTI, and buy-vs-rent tools when the decision affects long-term cash flow.
Keep in mind
These results are designed for educational planning. Real-world figures can change based on official rates, lender fees, tax treatment, insurance, and personal circumstances.
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Frequently asked questions
How much lower should the new rate be?
There is no fixed rule. Work out the break-even point; if you expect to keep the loan well beyond it, the refinance can make sense even for a modest rate cut.
Should I roll the closing costs into the new loan?
You can, but you then pay interest on them for the life of the loan. Enter them as closing costs here either way, so the break-even point reflects their full cost.
What about a new 30-year term?
It lowers the payment further but restarts the clock. Compare total remaining interest, not just the monthly figure, before choosing a longer term.
Can I refinance out of an adjustable-rate mortgage?
Yes, and many borrowers do so before the first rate reset. You will need to qualify again and pay closing costs.
Guides on this topic
Plain-English explanations to help you read the result above.
Fixed vs Adjustable-Rate Mortgage: Which One Fits You?
How fixed and adjustable-rate mortgages work, what rate caps mean, and a simple way to decide based on how long you plan to keep the loan.
Read the guideWhen Does Refinancing Make Sense? The Break-Even Rule
Use the break-even point to judge a refinance: compare closing costs with monthly savings, watch the reset term, and avoid the common traps.
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