Refinance Calculator Formula and Help

How it works

The Refinance Calculator compares a current fixed-rate mortgage path with a new fixed-rate loan. Original Loan mode derives the current payment and remaining balance from the original loan amount, original term, time remaining, and current rate. Remaining Balance mode starts from the entered balance and current monthly payment. The refinance side then models the new rate, new term, points, costs and fees, and any cash-out amount.

Use this calculator when you want to test how a possible refinance could change principal-and-interest payment, upfront costs, break-even time, remaining interest, and total modeled cost. Use Mortgage Payment for a new-loan payment only, Mortgage Payoff for extra-payment payoff paths, APR when fees need a cash-flow rate estimate, and lender Loan Estimates, Closing Disclosures, rate-lock documents, servicer payoff statements, tax sources, or legal sources for official terms.

Sources and validation

This calculator is an original implementation based on the app's documented fixed-rate refinance comparison formulas, Original Loan and Remaining Balance modes, remaining-balance derivation, deterministic fixtures, edge cases, rounding policy tests, and internal validation. It is not copied from a single source.

Outputs are checked with deterministic fixtures, edge cases, rounding policy tests, and internal validation artifacts. The result remains an educational estimate, not a lender quote, Loan Estimate, Closing Disclosure, APR disclosure, rate-lock document, approval decision, tax answer, legal disclosure, refinance recommendation, cash-out recommendation, or personalised borrowing advice.

• CFPB refinance checklist and cost-benefit materials should be used before copy discusses recouping refinance costs, moving soon, home value, credit standing, prepayment penalties, or refinance tradeoffs.
• CFPB Loan Estimate and Closing Disclosure materials should be used before copy discusses official loan offers, cash to close, closing costs, rate locks, revised estimates, final terms, rescission notices, or lender disclosures.
• CFPB points and lender credits materials should be used before copy explains discount points, lender credits, upfront-cost versus interest-rate tradeoffs, or point calculations in real offers.
• CFPB Regulation Z sections 1026.37, 1026.19, and 1026.22 plus lender disclosures should be used before copy discusses legal refinance purpose, rate-lock disclosures, finance charges, APR, disclosure timing, or disclosure accuracy.
• Lender, servicer, title, tax, insurance, legal, local regulator, and product documents are needed before copy makes state-specific, tax-deductibility, escrow, PMI, appraisal, loan-to-value, credit-score pricing, approval, prepayment-penalty, or product-specific refinance claims.

See the Calcs.finance methodology for the full review approach.

Assumptions

• The calculator models one current fixed-rate monthly path and one new fixed-rate monthly path. It does not model adjustable rates, daily interest accrual, interest-only periods, balloon payments, lender credits, financed closing costs beyond cash out, escrow changes, property taxes, homeowners insurance, mortgage insurance, HOA dues, appraisal or title fees beyond the entered costs, rate-lock changes, credit-score pricing, underwriting, loan-to-value limits, approval, or product-specific contract rules.
• Points are modeled as a user-entered percentage of the new loan amount and added to entered costs and fees as upfront closing costs. Cash out is added to the new loan amount and subtracted from the total-cost comparison so the model compares financing cost rather than treating borrowed cash as a cost by itself.
• Package fixtures cover a lower-payment longer-term refinance and a shorter-term cash-out refinance, and internal validation artifacts may be used only as validation evidence. CFPB refinance materials are needed before explaining recouping refinance costs, moving soon, home value, credit standing, and prepayment penalties; CFPB Loan Estimate and Closing Disclosure materials are needed before copy discusses official loan offers, cash to close, final terms, or revised estimates; CFPB points and lender credits materials are needed before explaining discount-point tradeoffs; and Regulation Z sections 1026.37, 1026.19, and 1026.22 are needed before legal disclosure, rate-lock, finance-charge, or APR claims. Results are educational estimates, not financial, tax, legal, lending, mortgage, consumer-rights, regulatory, or personalised advice.

Formula version 2026.05.22-generic-refinance

Common mistakes to avoid

• Looking only at the lower monthly payment. A longer new term can lower the payment while increasing total modeled cost, as the default fixture shows.
• Forgetting the keeping-time and closing-cost assumptions. The app reports a monthly-payment break-even only when the new payment is lower, but real decisions also depend on how long the loan is kept, whether costs change, and what official lender documents say.
• Treating entered points, costs, cash out, or interest rate as official lender terms. Points, credits, closing costs, rate locks, APR, cash to close, tax deductibility, escrow, prepayment penalties, and state-specific protections need lender, servicer, tax, legal, or regulator sources.

Worked example

Lower-payment and shorter-term cash-out examples

These examples use the app's package fixtures so the formula notes match production behavior rather than a lender worksheet.

1. Default Original Loan fixture: $400,000 original loan, 30-year original term, 25 years remaining, 6 percent current rate, 5.25 percent new rate, 30-year new term, 1 point, $3,500 costs and fees, and no cash out.
2. Original Loan mode derives a $2,398.20 current monthly payment and $372,217.43 current remaining balance.
3. The new loan amount is $372,217.43, points cost is $3,722.17, and modeled closing costs are $7,222.17.
4. The new fixed monthly payment is $2,055.40, so monthly savings are $342.80 and break-even time is 22 months.
5. The same fixture reports current remaining interest of $347,243.20, new-loan interest of $367,726.00, and a $27,704.97 total modeled cost increase after refinance costs and cash-out adjustments.
6. Remaining Balance shorter-term fixture: $275,000 entered balance, $2,200 current payment, 7 percent current rate, 15-year new term, 5.5 percent new rate, 0.5 points, $2,500 costs and fees, and $15,000 cash out.
7. That fixture creates a $290,000.00 new loan amount, $1,450.00 points cost, and $3,950.00 modeled closing costs.
8. The new monthly payment is $2,369.54, which is $169.54 higher than the entered current payment, so the app reports no monthly-payment break-even.
9. The shorter-term cash-out fixture reports current remaining interest of $219,080.52, new-loan interest of $136,517.56, and a $78,612.96 total modeled cost decrease after the cash-out adjustment.

The examples show why payment savings, break-even time, cash out, term length, interest difference, and total modeled cost need to be read together. They do not decide whether refinancing is suitable for a particular borrower.

What this formula does not include

• The result is not a lender quote, Loan Estimate, Closing Disclosure, APR disclosure, rate-lock document, approval decision, underwriting result, tax answer, legal disclosure, refinance recommendation, cash-out recommendation, or personalised borrowing advice.
• The app models fixed-rate monthly amortization. It does not model adjustable rates, daily interest accrual, interest-only periods, balloon payments, temporary buydowns, recasts, payment holidays, loan modifications, or rate-lock changes.
• Original Loan mode derives a current balance from original loan details and remaining term. If the real loan has extra payments, missed payments, fees, servicing adjustments, escrow changes, or payment changes, the derived balance may not match a statement balance or payoff amount.
• Remaining Balance mode depends on the entered balance and current payment. A current balance can differ from a payoff amount because of accrued interest, fees, escrow, or timing.
• Points are modeled as a percentage of the new loan amount. The app does not model lender credits, discount-point pricing grids, APR effects, prepaid finance charges, seller credits, or official cash-to-close disclosures.
• Entered costs and fees are added to points as upfront costs. The app does not model financed closing costs separately, appraisal fees, title charges, recording fees, taxes, insurance, mortgage insurance, HOA dues, escrow deposits, prepaid interest, or jurisdiction-specific charges unless the user includes them in the single costs field.
• Cash out is added to the new loan amount and subtracted from the total-cost comparison so borrowed cash is not treated as an expense by itself. That does not evaluate collateral, loan-to-value, credit pricing, tax treatment, consumer rights, or suitability.
• Break-even months are based only on modeled monthly payment savings divided by modeled upfront costs. The result does not decide how long a borrower will keep the loan, whether refinancing is beneficial, or whether the official loan terms are favorable.
• Interest and total-payment comparisons use simplified payoff simulations with no extra payments, no escrow, no taxes, no insurance, no PMI, no prepayment penalties, and no product-specific contract rules.
• Use CFPB Loan Estimate, compare Loan Estimates, points and lender credits, and Regulation Z materials before adding official loan-offer, APR, finance-charge, disclosure-timing, cash-to-close, rate-lock, or legal-disclosure claims.
• Internal validation artifacts are not public source citations; these formula notes rely on app derivation, deterministic fixtures, and official source boundaries.
• The result is educational only and does not constitute financial, tax, legal, lending, mortgage, consumer-rights, regulatory, housing, or personalised advice.

Terms used in this calculator

Break-even time

The number of months needed for payment savings to recover modeled upfront costs. The app reports this only when the new monthly payment is lower than the current modeled payment.

Points cost

The app's dollar estimate for discount points entered as a percent of new loan amount. Real point and lender-credit tradeoffs depend on lender pricing and official loan documents.

Cash out

Extra borrowed amount added to the new loan balance in the model. The calculator includes it in the new payment and subtracts it from total-cost comparison so borrowed cash is not counted as an expense by itself.

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