Mortgage refinance calculator

What is a mortgage refinance calculator?

A mortgage refinance calculator is a free online tool that shows what your home loan would cost if you replaced it with a new one at a different interest rate and term. You enter the balance you still owe, your current monthly payment, and the rate and length of the loan you are considering. In return you see the new monthly payment, how much you would save each month, and the total interest you would pay over the life of the refinanced loan. This lets you judge whether refinancing is worth pursuing before you talk to a lender.

How does it work?

You provide four pieces of information:

• The remaining mortgage balance — the amount you still owe on your current loan.
• Your current monthly payment — used to measure the monthly savings.
• The new annual interest rate, as a percentage.
• The new loan term, in years.

The calculator converts the new annual rate into a monthly rate and multiplies the term in years by twelve to get the number of monthly payments. It then applies the standard amortization formula to the remaining balance to find a level monthly payment for the new loan. Subtracting that figure from your current payment gives the monthly savings, and multiplying it by the number of payments gives the total you would pay and the total interest.

Formula

The monthly interest rate is the annual rate divided by twelve:

$r = \frac{\text{annual rate}}{100 \times 12}$

With $n = \text{term in years} \times 12$ monthly payments and a remaining balance $B$, the new level monthly payment $M$ is:

$M = \frac{B \cdot r \cdot (1 + r)^{n}}{(1 + r)^{n} - 1}$

When the interest rate is zero, this simplifies to:

$M = \frac{B}{n}$

The monthly savings is the current payment minus $M$. The total of payments on the new loan is $M \cdot n$, and the total interest is $M \cdot n - B$.

Worked example

Suppose you still owe $300,000, your current monthly payment is $1,800, and you are offered a new 30-year loan at a 5% annual rate:

• Monthly rate $r$ = 0.05 / 12 ≈ 0.0041667
• Number of payments $n$ = 30 × 12 = 360

Calculation:

$M = \frac{300000 \cdot 0.0041667 \cdot (1.0041667)^{360}}{(1.0041667)^{360} - 1} \approx 1610.46$

The new payment of about $1,610.46 is roughly $189.54 lower than the current $1,800 payment each month. Over the full term the total of payments is about $579,765.60 and the total interest on the new loan is about $279,765.60.

Notes

The monthly savings shown here compares only the payment amounts. A full picture of refinancing also weighs closing costs, points, and the fact that resetting the term can stretch payments over more years even when the monthly figure drops. Divide your closing costs by the monthly savings to estimate the break-even point — the number of months you must keep the loan before the refinance pays for itself.

This tool assumes a fixed rate and equal monthly payments, which is the most common structure for a mortgage. It does not include property taxes, homeowners insurance, or private mortgage insurance, which are often bundled into a lender’s quoted payment.

FAQs

How is the monthly savings calculated?

The calculator subtracts the new monthly payment from your current monthly payment. A positive result means the new loan lowers your payment; a negative result means it would cost more each month, which can still happen if you shorten the term to pay the loan off faster.

Does a lower payment always mean I save money overall?

No. Extending the term lowers the monthly payment but can increase the total interest you pay across the life of the loan. Compare the total interest on the new loan with what you would still owe in interest on your current loan, not just the monthly figures.

Why doesn’t the new payment start from my current rate?

The calculator builds the new payment entirely from the rate and term you enter, applied to the balance you still owe. Your old rate does not affect the new payment; it only matters through the current payment you type in, which sets the baseline for the monthly savings.