How to Calculate Refinancing a Mortgage

Author: Jon Kollman

Published on: 6/9/2025|4 min read

Fact Checked

Author: Jon Kollman|Published on: 6/9/2025|4 min read

Fact Checked

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Thinking about refinancing? Interest rate fluctuations may lead you to wonder whether the time is right to refinance a loan. With a mortgage refinance calculator, there’s no need to wonder. This simple tool shows you in seconds whether a refinance could lower your monthly payment, save you money on interest, or even unlock cash when you need it most. If you’re exploring your refinance options, it helps to know how to calculate a mortgage refinance the right way. Here’s how to run the numbers, what to watch for, and how to tell if refinancing really works in your favor.

Here's what information to have on hand before you start, plus tips for evaluating your options.

Loan details you'll need

To get the best answers, you'll need accurate input. That means using real numbers from your mortgage paperwork and lender quotes. Here's the information to gather:

Current loan balance: This is how much you still have left to pay on your home loan
Number of months remaining in term: How long you have left until your mortgage is paid off (typically measured in months, not years)
New loan term: The length of your new loan (e.g., 10, 15, 20, 25, or 30 years)
Interest rate: Your current mortgage rate
New interest rate: The refinance interest rate you've been quoted or are aiming for
Cash-out refinance amount: Any extra amount you'd borrow via a cash-out refinance

Some refinance calculators let you factor in estimated closing costs, too, which is helpful for seeing the full picture when comparing total loan costs and not just monthly payments.

Evaluating your options

Once you've entered your data into a mortgage refinance calculator, the results can help steer you toward the right option. Pay particular attention to:

How much you'll save each month: This is the difference between your current loan payment and your refinanced loan payment.
How much you'll save in interest: Ideally, refinancing will save you money over the long term, whether it's because the interest rate is lower, the loan term is shorter, or both.
How your total loan costs stack up: This takes into account the total interest paid and the closing costs for the refinance.
How long it will take to recoup the cost of taking out the loan: This is also called your breakeven point. Basically, it's how long (in months) it will take you to reach the point where you start saving money.

Example of a mortgage refinance calculation

Let's walk through an example to see how a refinance can affect your loan (and bottom line).

Suppose you have a 30-year fixed-rate mortgage for $400,000. You've been paying it for two years, and your interest rate is 6.5%.

Now, let's say you have an offer in hand for a 15-year mortgage refinance with a rate of 5%. After comparing your quotes and doing your homework, you estimate your closing costs will be about $5,000.

How will this affect your payments?

Current loan Refinance option Loan amount (remaining) $390,758.77 $390,758.77 Loan term 336 months 180 months Interest rate 6.5% 5% Monthly payment $2,528.27 $3,090.10 Total interest $458,739.95 $165,458.41 Total cost $849,498.72 $556,217.18 Upfront cost -- $5,000 Total savings -- $288,281.54

Disclaimer: The figures shown in the example above are for illustrative purposes only and do not reflect current market rates or actual loan offers. Your refinance terms, including interest rate, monthly payment, and total cost, will vary based on your credit profile, loan amount, location, and other factors.

In this case, your monthly mortgage payment would go up, but you'd save almost $300,000 over the life of the loan. Even if you made it a cash-out refinance for an extra $150,000, you'd still come out ahead.

However, suppose you changed a few details: Instead of 15 years, it's 30 for the refinance. And let's say the interest is 6% instead of 5%, plus you'll receive a $150,000 cash-out lump sum. With those changes, you're no longer coming out ahead. In fact, your monthly payment would go up, costing you over $160,000 more than leaving it alone.

Considerations for refinancing

Running the numbers is only part of the picture as you calculate whether a refinance is worth it. Even if it seems to make mathematical sense, here are a few key questions to ask as you debate whether you should refinance:

How long will it take you to break even?

Consider your breakeven point and how long it takes for your monthly savings to outweigh your upfront costs (usually closing fees). For example, if your breakeven point is eight years in the future but you expect to move in the next three years, you won't have enough time to recoup the costs of refinancing.

Is it worth your time?

Is it worth it to pay closing costs and go through the mortgage application process again? Or should you consider alternatives to a mortgage refinance? If your savings are small, it might make more sense to apply extra payments toward your current loan instead.

How much will you actually save?

A lower rate doesn't always equal big savings, especially if closing costs are high. Look at the full picture and not just the rate. How much will you actually save? How much will go to other costs?

A refinance calculator is just the start

Running the numbers with a refinance mortgage calculator is a good first step. The next is finding a refinance option that actually works for you.

Check out AmeriSave's personalized refinance rates to see what you might save with the right refinancing solution for you.

Frequently Asked Questions

The easiest way to know if refinancing makes sense is to use a mortgage refinance calculator. It shows you the difference between what you’re paying now and what your payment could be after refinancing. A mortgage refinance might be worth considering if you’ll pay less in interest and the monthly payments fit into your budget.

You’ll need to compare the current cost of your mortgage with the savings you may or may not see with a refinance. Try this:

Calculate the interest cost of the new loan and compare it to the total interest cost of the existing mortgage.
Subtract the closing costs and other fees of the new loan.

How will it affect your monthly payment? Your total costs? If there are savings there, you might benefit from a refinance.

Overview
Loan details you'll need
Evaluating your options
Example of a mortgage refinance calculation
How will this affect your payments?
Considerations for refinancing
How long will it take you to break even?
Is it worth your time?
How much will you actually save?
A refinance calculator is just the start
FAQ

Knowing how to calculate a mortgage refinance helps you figure out when a refi is worth it (and when it isn't). The right tools help you compare offers from different lenders and break down the savings to see which path is right for you. Here's what information to have on hand before you start, plus tips for evaluating your options. Loan details you'll need To get the best answers, you'll need accurate input. That means using real numbers from your mortgage paperwork and lender quotes. Here's the information to gather: Current loan balance: This is how much you still have left to pay on your home loan Number of months remaining in term: How long you have left until your mortgage is paid off (typically measured in months, not years) New loan term: The length of your new loan (e.g., 10, 15, 20, 25, or 30 years) Interest rate: Your current mortgage rate New interest rate: The refinance interest rate you've been quoted or are aiming for Cash-out refinance amount: Any extra amount you'd borrow via a cash-out refinance Some refinance calculators let you factor in estimated closing costs, too, which is helpful for seeing the full picture when comparing total loan costs and not just monthly payments. Evaluating your options Once you've entered your data into a mortgage refinance calculator, the results can help steer you toward the right option. Pay particular attention to: How much you'll save each month: This is the difference between your current loan payment and your refinanced loan payment. How much you'll save in interest: Ideally, refinancing will save you money over the long term, whether it's because the interest rate is lower, the loan term is shorter, or both. How your total loan costs stack up: This takes into account the total interest paid and the closing costs for the refinance. How long it will take to recoup the cost of taking out the loan: This is also called your breakeven point. Basically, it's how long (in months) it will take you to reach the point where you start saving money. Example of a mortgage refinance calculation Let's walk through an example to see how a refinance can affect your loan (and bottom line). Suppose you have a 30-year fixed-rate mortgage for $400,000. You've been paying it for two years, and your interest rate is 6.5%. Now, let's say you have an offer in hand for a 15-year mortgage refinance with a rate of 5%. After comparing your quotes and doing your homework, you estimate your closing costs will be about $5,000. How will this affect your payments? Current loan Refinance option Loan amount (remaining) $390,758.77 $390,758.77 Loan term 336 months 180 months Interest rate 6.5% 5% Monthly payment $2,528.27 $3,090.10 Total interest $458,739.95 $165,458.41 Total cost $849,498.72 $556,217.18 Upfront cost -- $5,000 Total savings -- $288,281.54 Disclaimer: The figures shown in the example above are for illustrative purposes only and do not reflect current market rates or actual loan offers. Your refinance terms, including interest rate, monthly payment, and total cost, will vary based on your credit profile, loan amount, location, and other factors. In this case, your monthly mortgage payment would go up, but you'd save almost $300,000 over the life of the loan. Even if you made it a cash-out refinance for an extra $150,000, you'd still come out ahead. However, suppose you changed a few details: Instead of 15 years, it's 30 for the refinance. And let's say the interest is 6% instead of 5%, plus you'll receive a $150,000 cash-out lump sum. With those changes, you're no longer coming out ahead. In fact, your monthly payment would go up, costing you over $160,000 more than leaving it alone. Considerations for refinancing Running the numbers is only part of the picture as you calculate whether a refinance is worth it. Even if it seems to make mathematical sense, here are a few key questions to ask as you debate whether you should refinance: How long will it take you to break even? Consider your breakeven point and how long it takes for your monthly savings to outweigh your upfront costs (usually closing fees). For example, if your breakeven point is eight years in the future but you expect to move in the next three years, you won't have enough time to recoup the costs of refinancing. Is it worth your time? Is it worth it to pay closing costs and go through the mortgage application process again? Or should you consider alternatives to a mortgage refinance? If your savings are small, it might make more sense to apply extra payments toward your current loan instead. How much will you actually save? A lower rate doesn't always equal big savings, especially if closing costs are high. Look at the full picture and not just the rate. How much will you actually save? How much will go to other costs? A refinance calculator is just the start Running the numbers with a refinance mortgage calculator is a good first step. The next is finding a refinance option that actually works for you. Check out AmeriSave's personalized refinance rates to see what you might save with the right refinancing solution for you.