Compare the remaining loan with the refinance
Use your current outstanding balance and the time left on your existing mortgage. The original loan term is not the remaining term: a 30-year mortgage after 10 years of scheduled payments has 20 years left. Both payment estimates include principal and interest. Treating the old payment as interest alone understates its payment and gives an invalid comparison.
This calculator models two fixed-rate, fully amortizing loans for the same balance. Refinancing costs are paid in cash upfront. It does not model cash-out borrowing, fees added to the loan, adjustable rates, or interest-only periods.
Payment calculation
For a balance P, monthly rate r and n remaining monthly payments, the payment is M = P × r / (1 − (1 + r)^−n). At zero interest, M = P / n. The current payment uses the current rate and remaining term; the new payment uses the offered rate and new term. Interest over each schedule is its payment multiplied by its number of months, less the balance.
For example, the Federal Reserve's published comparison uses a balance of USD 200,000 over 30 years. At 6%, the monthly principal-and-interest payment is about USD 1,199; at 5.5%, it is about USD 1,136. These rounded reference payments illustrate why both sides must use full amortization.
Payment break-even and total cost answer different questions
Payment break-even divides upfront costs by positive monthly payment savings. For example, costs of USD 3,000 and savings of USD 150 per month give a 20-month estimate. The estimate is only displayed when both loans would still have payments at that point. A higher or unchanged monthly payment has no payment-savings break-even, although a shorter term may still save interest.
Extending the term can lower the payment while increasing total interest. The lifetime-savings result therefore compares current remaining interest against new interest plus upfront costs. A negative result means the refinance costs more over the full schedules. Payment break-even does not account for equity differences or the time value of money, and it does not promise overall savings if you sell early.
Assumptions and sources
Payments are monthly and interest rates stay fixed. Taxes, insurance, escrow, deductions, early repayments and opportunity costs are excluded. Include applicable lender fees and prepayment charges in the upfront costs. Actual lender schedules can differ because of rounding and payment dates. This is an educational estimate, not a personalized recommendation or loan offer.
See the Federal Reserve refinance guide and worked examples and the CFPB explanation of refinancing trade-offs.