Mortgage Refinance Calculator

Refinancing a mortgage replaces your existing loan with a new one, usually to capture a lower rate, change the term, or both. Closing costs typically run 2% to 5% of the loan amount, so refinancing only pays off if you keep the new loan long enough to recoup them.

This calculator rebuilds both loans and puts them side by side: the calculated monthly payment on each, the total you'll pay on each, and, using your discount rate, what each payment stream costs in today's dollars. The data table and charts break both loans down year by year or month by month, so you can see exactly where the savings come from.

How does this calculator work?

Start with the loan you have: enter the original mortgage amount, its length, the interest rate, and how many years are left. You don't type in your current balance; the calculator amortizes the original loan forward and derives the payoff balance for you. It appears in the highlighted line beneath the results, and the current loan's calculated Monthly Payment shows right in the form.

Then describe the refinance: the New Mortgage Amount, term, and rate, plus any down payment and refinance expenses. The New Mortgage Amount defaults to your current payoff balance, but you can change it, for example to model a cash-out refinance where you borrow more than you owe. The down payment and refinance expenses are both counted as part of the new loan's first-year cost in the totals, table, and charts, since that cash is still money the refinance path costs you.

The results show each loan's Total Mortgage Payments and PV of Mortgage Payments side by side. Below that sits a data table you can flip between yearly and monthly views (with a totals row), and four charts: Loan Balance, Interest Payments, Total Loan Payments, and PV of Total Loan Payments.

What is the present value of total loan payments?

A dollar you pay ten years from now doesn't cost you as much as a dollar you pay today, because money you keep in the meantime can earn a return. The Discount Rate field is that assumed return, and the calculator uses it to convert every future loan payment into today's dollars. Each year's payments are divided by (1 + discount rate) once for every year they sit in the future (this year's payments count at full value), and the running sum is the present value (PV) of total loan payments.

This matters most when the two loans have different terms. Total payments treat a dollar due in year twenty the same as a dollar due next month, which can make a longer refinance look worse than it really is, or a shorter one look better. Present value puts both payment streams on the same footing: if the new loan's PV is below the current loan's, you come out ahead in today's dollars.

Worked example

You owe $250,000 with 27 years left at 7.25%, and can refinance to 6.0% over the same 27 years with no down payment or expenses. Assume a 5% discount rate, the return you figure your money could earn elsewhere. To model this here, enter an original mortgage of $250,000 over 27 years at 7.25% with 27 years left (a loan just taken out, so the payoff balance is the full $250,000), then a new 27-year mortgage at 6.0%.

Current payment

$1,760.48

New payment (6.0%, 27 yr)

$1,559.96

Monthly savings

$200.52

Total interest saved

$64,969.00

PV of current payments (5% discount)

$324,813.40

PV of new payments

$287,816.71

PV savings, in today's dollars

$36,996.68

How the numbers work

At 7.25%, the current $250,000 balance over its remaining 27 years costs $1,760.48 a month. Refinancing the same balance and the same 27-year term at 6.0% drops the payment to $1,559.96, a $200.52 monthly saving.

Keeping the term identical is what makes this pure savings: the rate falls but the payoff date doesn't move out. Over the remaining 324 months that $200.52 adds up to $64,969.00 in avoided interest, all of it real because there were no closing costs in this example.

The present-value figures run the same comparison in today's dollars. The current loan costs $21,125.82 a year; discounting each year at 5% (this year at full value, next year divided by 1.05, and so on) gives a PV of $324,813.40 over the 27 years. The new loan's $18,719.56 a year discounts to $287,816.71. So the refinance is $36,996.68 cheaper in present-value terms: less than the nominal interest saved, because those savings trickle in over 27 years and later dollars count for less today.

The trap to watch for is re-extending the term. Refinancing $250,000 with 27 years left into a fresh 30-year loan lowers the payment further, but part of that drop just comes from spreading the same balance over more months, which can raise lifetime interest even at a lower rate.

When mortgage refinancing makes sense

Compare the Total Mortgage Payments and PV of Mortgage Payments for both loans, not just the monthly payment. A lower payment can still cost more over the life of the loan if it comes from a longer term rather than a lower rate. Run the numbers with your actual refinance expenses added in, since a mortgage refinance's closing costs are large enough to change the answer.

Two ways to avoid the term-reset trap: refinance into a term that matches or shortens your term, or take the lower-rate loan but keep paying your previous, higher monthly amount so the extra goes to principal. If you want to borrow more than you owe (a cash-out refinance), raise the New Mortgage Amount above your payoff balance and the calculator will show the larger loan's true cost alongside the current one.