Most refinance calculators subtract your new payment from your old one and call the difference savings. That answer is wrong often enough to be dangerous, because a mortgage payment is not a cost, part of it is your own money going back into the house, and refinancing restarts a clock you are years into. This one measures what you actually pay and what you actually still owe.
An estimate from your figures, not advice, and not an offer of credit.
Everything on this page updates as you type. The only figures that matter are the ones on your mortgage statement, balance, rate, and how many payments you have made.
| Now | After |
|---|
Three ways of answering the same question, which is one more than most people are ever shown. They disagree, and the gap between them is the whole argument.
everything paid plus everything still owed
ignoring principal on both sides
costs divided by the payment drop
Lower is better. The lines cross at the point where refinancing has cost you less than staying put. Hover to read any month.
| Rate | Loan | Payment | At closing | Net cost |
|---|
He will pull your actual payoff, run it against real pricing rather than the rate you typed in, and tell you which of these options is right, including when the answer is to do nothing. Sending it does not start an application and is not a credit inquiry.
Everything the tool above does, written out, so you can check it rather than take it on faith. The arithmetic is not complicated. What is unusual is refusing to flatter it.
Every payment splits into interest, which is gone, and principal, which moves from your bank account into your house. Only the interest is an expense. The principal is a transfer between two things you own.
This matters because the standard break-even divides closing costs by the drop in the monthly payment. If your payment falls by $400 and $150 of that is because you are paying the balance down more slowly, the real saving is $250 and the break-even is sixty per cent longer than you were told.
Every figure on this page uses net position instead: everything you pay out, plus everything you still owe, less any cash you receive. Principal cancels out of that expression automatically, because a dollar of principal leaves the payments term and arrives in the balance term.
This is the part that gets buried. If you are four years into a thirty year loan and you refinance into another thirty year loan, you will be making mortgage payments for thirty-four years. The payment falls partly because the rate improved and partly because you gave yourself four more years to pay.
On a large balance the second effect can be bigger than the first. It is entirely possible to cut your rate by a full point, cut your payment by hundreds of dollars, and still pay more interest over your lifetime than if you had done nothing.
The comparison table shows interest still to pay on both loans over their whole remaining lives, and the chart shows the balance you would still owe at any point. If the reset costs you more than the rate saves, you will see it.
| Method | What it counts | Tends to |
|---|---|---|
| The quick one | Closing costs divided by the drop in payment | Understate, often badly |
| Interest only | Interest and insurance on both loans, plus costs. Principal ignored on both sides | Be about right on a same-term refinance |
| Honest | Everything paid, plus everything still owed, less cash received | Be the one to trust |
When the new term matches what is left of the old one, all three roughly agree. The further you stretch the term, the further they separate, which is exactly when the quick one is quoted most confidently.
There is a third option that is almost never put in front of borrowers, because it does not sound like a benefit: take the lower rate, then keep writing the cheque you already write.
Nothing in your monthly budget changes. But the difference between the new payment and your old one goes entirely to principal, at the new lower rate. The loan is usually gone years earlier than the one you have now, and the lifetime interest falls rather than rises.
It is the right answer for anyone refinancing to save money rather than to solve a cash-flow problem, which is most people who say they want a lower rate. If you do need the cash flow, take the lower payment; that is what it is for. Just know which one you chose.
There are three ways and they are not interchangeable.
Add them to the loan. Nothing out of pocket, but you borrow more and pay interest on the costs for the whole term. The most common choice and rarely the cheapest.
Pay cash. The loan stays smaller, so the interest does too. Best if you are staying a long time and have the money sitting idle.
Take a lender credit. The lender pays your costs in exchange for a higher rate. Nothing is added to the balance and nothing leaves your pocket, but you carry the higher rate for as long as you keep the loan. Usually wins over a short hold and loses over a long one.
The table above prices all three the same way, over the number of years you said you would keep the house. Change that number and the winner can change with it.
On a conventional loan the Homeowners Protection Act, 12 U.S.C. 4902, terminates borrower-paid insurance automatically when the scheduled balance reaches 78% of the value the property had when you bought it. You can ask for cancellation at 80%, and most servicers will consider a current appraised value, which on an appreciating property gets there far sooner. Ask before you refinance to remove it, an appraisal is cheaper than a loan.
FHA is different, and it is the reason a great many refinances happen. Under Mortgagee Letter 2023-05, annual insurance ends after eleven years only if the loan started at 90% loan-to-value or less. Above that it runs for the life of the loan. Paying the balance down does not end it. A new appraisal does not end it. The only exit is a new loan.
Sources: 12 U.S.C. 4902; HUD Mortgagee Letter 2023-05. The premium rate used for a new conventional loan is a representative national card and can be overwritten with your own quote.
Rolling credit cards or an auto loan into a mortgage always lowers the monthly obligation, because you are replacing a rate in the twenties with one in the sixes and a term of a few years with one of thirty. Both changes push the payment down.
Only one of them makes the debt cheaper. Stretching a three-year balance over thirty years can cost more in total interest even at a fraction of the rate, and the panel above shows both figures side by side rather than only the flattering one.
There is also a change in kind, not just in amount. Credit card debt is unsecured, the worst case is a judgment. The same balance inside a mortgage is secured by your house. That is a real trade and it should be a conscious one.
Where it genuinely works: when the cash flow is the point, or when you consolidate and then keep paying the old combined total into the new mortgage.
Two things happen at every refinance that look like money and are not.
Your existing escrow account is refunded, usually within thirty days of closing. It is often several thousand dollars and it is your own money coming back, you funded it, and you will fund a new one at closing.
And you skip a month. Mortgage interest is paid in arrears, so the changeover leaves one month with no payment due. It is a timing artefact, not a saving; the interest for that period is collected at closing as prepaid interest instead.
Both are routinely presented as benefits of refinancing. Neither one changes what the loan costs, and neither is counted anywhere on this page.
When a recast would do. If you have paid the balance down and want a lower payment rather than a lower rate, most servicers will re-amortise the existing loan over its remaining term for a few hundred dollars. Same rate, same payoff date, lower payment, no closing costs and no new loan. Ask for it by name.
When your insurance is about to fall off anyway. A conventional loan three months from automatic termination does not need a refinance to drop it.
When you are moving. If the honest break-even is longer than you expect to keep the house, the arithmetic has already answered.
When the only gain is a skipped payment and an escrow refund. See above.
The rate sets your payment. The annual percentage rate folds in what it cost to get the loan, so it is always the higher of the two, and the gap between them is a rough measure of how expensive the transaction is.
Regulation Z decides what goes in. Origination and discount points, lender fees and prepaid per-diem interest are finance charges. Title, escrow, settlement, appraisal, credit report and recording are excluded when they are bona fide and reasonable, under 12 CFR 1026.4(c)(7). Mortgage insurance sits in the payment stream for as long as it runs.
A wide gap on a small loan usually means fixed fees are doing the damage. A wide gap on a large one usually means points. Neither is automatically bad, points bought deliberately for a long hold are a reasonable trade, but the gap is worth asking about.
Source: 12 CFR 1026.4, 1026.22.
Above the national conforming baseline of $832,750 a loan becomes high balance in counties that allow it, and jumbo above the county ceiling. High balance is still conforming and usually prices slightly above a standard loan. Jumbo leaves the agency world entirely: pricing, reserves and documentation are set by whichever investor buys it.
This matters on a cash-out, where crossing a limit can cost more than the cash was worth. The tool shows which side of the line you are on for the county you enter.
2026 FHFA conforming loan limits, one unit.
It does not quote you a rate. The rate boxes open on example figures so the page has something to work with; they are not our pricing and nothing here adjusts them. Everything downstream of the rate box is arithmetic on whatever figure is in it, so the answer is only as good as the rate you put there. Replace it with one you have actually been quoted.
It assumes a fixed rate on a primary residence with one lien. Adjustable rates, second homes, investment property, second liens left in place behind the new loan, and construction or renovation financing all change the analysis.
It does not model taxes. Mortgage interest may or may not be deductible for you, and the rules for cash-out proceeds not used on the home are different again. That is a question for your tax adviser, and the answer can move the break-even in either direction.
For FHA and VA loans it will point you at the dedicated calculators, because those programmes have statutory tests, the FHA net tangible benefit rule and the VA 36-month recoupment requirement, that a general calculator has no business guessing at.
Compare everything you will pay plus everything you will still owe, under each option, at the point you expect to sell or refinance again. If refinancing leaves you with a lower total, it is worth it. The common shortcut, closing costs divided by the drop in payment, ignores that part of a mortgage payment is principal, which is your own money, and it usually makes the refinance look better than it is.
Shorter than the time you will keep the house, with room to spare. Two to three years is comfortable for most people. What matters more than the number itself is which break-even you are being shown: the quick calculation and the honest one can differ by years on a refinance that stretches the term.
Yes, unless you choose a shorter term. If you are five years into a thirty year loan and refinance into another thirty, you will make mortgage payments for thirty-five years in total. The payment falls partly from the better rate and partly from the longer runway, and on a large balance the second effect can outweigh the first over a lifetime.
There is no universal number, and the old rule about needing a full point is not one. It depends on your balance, your costs, how long you will stay, and whether the refinance also drops mortgage insurance. On a large balance with low costs, a quarter point can pay for itself; on a small balance with fixed fees, a full point may not.
Financially they are close, and a 15 year loan usually carries a lower rate, which tips it. The difference is flexibility: a 30 year loan you overpay can be dropped back to the required payment in a hard month, and a 15 year loan cannot. Take the shorter term if the rate gap is meaningful and the payment is comfortable; otherwise take the 30 and pay it like a 15.
No. The lender covers your costs in exchange for a higher rate, and you pay that rate for as long as you keep the loan. It is genuinely the cheaper choice over a short hold, and the more expensive one over a long hold. The calculator prices it against paying cash and against rolling the costs into the balance so you can see where the crossover falls for your numbers.
Often, and on an FHA loan it may be the only way. FHA insurance written above 90% loan-to-value runs for the life of the loan, paying down the balance does not end it. Conventional insurance ends on its own at 78% of the original value, and you can request cancellation at 80% or on a current appraised value, which is usually cheaper than a refinance.
It always lowers the monthly payment, because you are swapping a rate in the twenties for one in the sixes and a few years for thirty. Whether it lowers the total cost depends on the term: stretching a three-year balance over thirty years can cost more in interest even at a much lower rate. You are also converting unsecured debt into debt secured by your house. It works best when the cash flow is the point, or when you keep paying the old combined amount into the new mortgage.
Two reasons, and neither is a saving. Your existing escrow account is refunded after closing, that is your own money, and you will fund a new escrow account at the same time. And you skip a month, because mortgage interest is paid in arrears, so the changeover leaves a gap. Both are timing, not benefit.
A recast re-amortises your existing loan over its remaining term after you make a lump-sum principal payment. Same rate, same payoff date, lower payment, and it usually costs a few hundred dollars rather than a few thousand. If you want a lower payment and your rate is already good, ask your servicer about a recast before you refinance. Not every loan is eligible, and FHA and VA loans generally are not.
For a conventional rate-and-term refinance, generally at least 3% to 5%, though mortgage insurance applies above 80% loan-to-value. For a conventional cash-out on a home you live in, 20% equity is the usual limit. FHA, VA and USDA have their own rules, and the VA cash-out reaches 100% of value.
Typically thirty to forty-five days from application to funding, and there is a three business day right of rescission after closing on a primary residence before the loan funds. Rate locks are usually thirty to sixty days, so the lock should cover the timeline with margin.
Modestly and briefly. There is a hard inquiry, and the new account resets the average age of your accounts. Multiple mortgage inquiries inside a short shopping window are treated as one for scoring purposes, so comparing lenders does not multiply the effect.
Sometimes. Conventional loans need equity, but Fannie Mae and Freddie Mac both run high loan-to-value refinance programmes for loans they already own, and FHA and VA streamlines generally do not require an appraisal at all. Which door is open depends on who owns your loan today.
Taylor Weiner, mortgage loan originator, NMLS #263090 · Lower, LLC, NMLS #1124061 · 5950 Symphony Woods Road, Suite 312, Columbia, MD 21044 · (714) 658-4912 · tweiner@twteam.com · Verify licensing at nmlsconsumeraccess.org. Licensed to originate residential mortgage loans in California.
Not a government agency. The TW Team at Lower is not affiliated with, acting on behalf of, or endorsed by HUD, the FHA, the VA, the USDA, the FHFA, Fannie Mae, Freddie Mac or any other government agency. This page is not a government publication and has not been reviewed or approved by HUD, by the FHA, by the VA, by the USDA or by any other government agency. FHA loans are insured by the Federal Housing Administration and VA loans are guaranteed by the Department of Veterans Affairs; both are originated by approved lenders, not by the agencies themselves.
This is not a quote and not a commitment to lend. It is not an offer or extension of credit. Every figure on this page is an estimate generated from information you entered, together with assumed fees that are not a fee sheet. Nothing here is binding on anyone. All credit is subject to underwriting and approval. Programs, rates, terms and conditions are subject to change or withdrawal without notice, and rates are not locked. Your actual terms are disclosed on the Loan Estimate you receive within three business days of a completed application, and are finalised on the Closing Disclosure you receive at least three business days before closing.
Refinancing may increase the total cost of your loan over its life. That is not a formality on this page, it is the specific thing the tool is built to measure. Extending the term of a loan you are already years into can raise your total interest even when the rate falls and the monthly payment drops. The comparison and the chart show this directly.
The annual percentage rate shown is calculated, not quoted. It is derived by discounting the payment stream implied by the figures you entered back to the amount financed, treating origination and discount points, lender fees and prepaid per-diem interest as prepaid finance charges, and excluding title, escrow, settlement, appraisal, credit report and recording charges as 12 CFR 1026.4(c)(7) permits when they are bona fide and reasonable. Mortgage insurance is included in the payment stream for as long as it is scheduled to run. It is not the APR you will be quoted.
Your figures drive the answer, and several are easy to get wrong. Balance, rate, payments made, the value of the home, the value when you bought it, and the mortgage insurance you pay today all move the result. The value at purchase in particular is what determines when conventional mortgage insurance terminates, and it is not the same as what the home is worth now.
Mortgage insurance and loan limit figures. Conventional cancellation follows the Homeowners Protection Act, 12 U.S.C. 4902; FHA annual premium duration follows HUD Mortgagee Letter 2023-05. Conforming loan limits are the 2026 FHFA one-unit figures. The premium rate used for a new conventional loan is a representative national rate card, not a quote, and can be overwritten with your own.
The calculator models a fixed-rate first lien on a one-unit primary residence. It does not model adjustable rates, second homes, investment property, a second lien or HELOC left in place behind the new loan, buydowns, construction or renovation financing, or interest-only structures.
Taxes, homeowner's insurance and association dues are assumed to be identical whether you refinance or not. They are therefore excluded from every comparison on the page, and appear only inside the displayed monthly payment. This is deliberate: including them in a comparison adds equal amounts to both sides and makes a difference look smaller than it is.
“Net position” means every payment made through a given month, plus cash paid at closing, plus every balance still outstanding at that month, less any cash received at closing. Other debts run on their own amortisation where they are not being consolidated. Property appreciation, the opportunity cost of cash, rent, maintenance and every tax effect are excluded.
The payment on your current loan is derived from the balance and the months remaining rather than from the original loan amount, so a borrower who has made extra principal payments still gets a correct figure. If you have an interest-only or negatively amortising loan, that derivation will not match your statement.
The mortgage insurance termination month for a conventional loan is calculated on the scheduled amortisation against the value at purchase, which is how automatic termination works under the Homeowners Protection Act. Cancellation on request at 80%, and cancellation based on a current appraised value, both come sooner and are not modelled.
The lender credit option assumes the rate you enter in the “rate with a lender credit” field fully covers the closing costs shown. Real lender credits are quoted in points against a specific rate on a specific day and may cover more or less than the costs.
The debt consolidation panel assumes each debt is paid at the monthly payment you enter until it clears. Revolving balances that continue to be used, promotional rates that expire, and minimum payments that fall as the balance does are not modelled.
Nothing on this page is legal, tax or investment advice. Mortgage interest deductibility depends on your circumstances and on how the proceeds are used, and it can change the comparison in either direction. Consult your own advisers.
⌂ Equal Housing Opportunity. Lower, LLC is an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Act and the Equal Credit Opportunity Act.
Figures current as of September 2026.