Mortgage Refinance Calculator: Should I Refinance?

If you’re thinking of refinancing your mortgage, it’s probably because you want to save money. There are two ways to save money by refinancing:

• Reducing the monthly payment.

• Paying less interest over time.

It’s unlikely, but you may be able to accomplish both: reduce the monthly payment and pay less interest over time. But in most cases, you’ll do one and not the other:

• Pay more every month but pay less interest over time.

• Pay less every month but pay more interest over time.

Or a refinance could result in a higher monthly payment and more interest over time.

The results of this calculator explain which one of the above categories your refinance would fit into.

The calculator includes a colorful slider that displays the years remaining on your current loan. It calculates how much you would save (or not), year by year, by refinancing.

The calculator asks if your priority is reducing the monthly payment or the interest you’ll pay in the next few years.

You’ll get similar results, phrased differently, either way you answer. If you say your priority is a lower monthly payment, the answer mentions the payment first and interest second. If you say your priority is paying less interest over time, the answer mentions interest first and the monthly payment second.

You have the green light to refinance if both the payment and interest over time will go down. Speaking of green, the slider and the bars above it are green in this scenario (after a short segment of red).

When you shorten the loan term — from 30 years to 15 years, for example — you almost always end up with a higher monthly payment, even with a lower interest rate. That’s because you’ll pay principal (the amount you borrowed) over fewer months. You’ll pack more principal into each payment.

But you’re also borrowing for a shorter time, so you pay less interest.

The slider and the bars above it are orange in this scenario (after a segment of red).

When you refinance a mortgage and start over at the beginning of a new 30-year loan, you’re likely to get a lower monthly payment. But all those years of interest payments will add up.

This refinance might meet your needs if you’ll sell the home within a few years, or if you need rock-bottom monthly payments for a while to meet other needs (to pay tuition, for example).

Much of the slider and the bars below it may be red in this scenario, indicating that you’ll pay more total interest and closing fees during that period.

Or, the slider’s color might change from red to green and then to orange in this scenario, indicating that you’ll save money for a while — before the total payments pile up.

If you’re not going to save money either way, you probably don’t want to refinance. But you might be compelled to refinance anyway — as part of a divorce settlement or to switch from an adjustable-rate mortgage to a fixed-rate loan, for example.

The slider and the bars under it are red in this scenario.

As you move the slider left and right, the calculator updates your total savings over the indicated number of years. The calculator includes interest paid, plus the estimated closing costs.

The slider starts in the red, indicating that the closing costs exceed the interest savings at first.

When the slider shifts from red to green, it means that the interest savings total more than the closing costs over that number of years.

When the slider shifts from red to orange, it means that the interest savings total more than the closing costs during that period — but your monthly payments will be higher. This usually happens when you shorten the loan term, say from 30 years to 15 years.

If the slider shifts from red to green to orange, it means the interest savings keep adding up, but the accumulated principal-and-interest payments, plus the estimated closing costs, eventually cost more than the original loan.

When you refinance, you typically pay closing costs. During the period when those costs exceed your interest savings, the slider is red. The end of the red segment indicates the breakeven period, when the interest savings exceed the closing costs.

If you plan to sell your home within a few years, pay attention to the breakeven period. You’ll lose money on the refinance if you sell before breaking even.

Should you refinance again before breaking even on a previous refinance? The answer depends on how much more you will save. When deciding whether to refinance again, disregard the closing costs on the original refinance. You’ve spent that money and you can’t unspend it.