How the Refinance Calculator works
Refinancing replaces your current loan with a new one — usually to get a lower interest rate, a different term, or both. This calculator compares your current loan's remaining payment and interest against a new loan on the same balance, then subtracts the closing costs you'd pay to refinance.
The most useful number is often the break-even point: how many months of savings it takes to recover what you spent on closing costs. If you plan to keep the loan longer than that, the refinance is generally worth it.
Keep in mind that resetting your term matters as much as the rate. A lower rate on a fresh long term can lower your monthly payment while still increasing the total interest you pay over the life of the loan, especially if you've already paid down several years of your current loan.
A worked example
You owe $200,000 with 25 years left at 7.5% — a $1,477.98 payment. Refinancing to 6.25% over a fresh 25 years drops the payment to $1,319.34, saving $158.64 a month. With $3,000 in closing costs, you break even in about 19 months, and staying the full term saves roughly $44,593 in interest net of costs.
| Current | Refinanced | |
|---|---|---|
| Rate | 7.5% | 6.25% |
| Monthly payment | $1,477.98 | $1,319.34 |
| Break-even | — | ~19 months |
How to read your results
Monthly savings is the payment drop. Break-even is closing costs ÷ monthly savings — the number of months before the refinance is ahead. If you might sell or refinance again before then, it probably is not worth it. Lifetime interest saved assumes you keep the new loan to term.
When to use this calculator
Use it when rates have fallen since you borrowed, when your credit has improved enough to requalify, or when you want to shorten the term. Also run it before a cash-out refinance to see what the higher balance does to lifetime cost.
Common mistakes to avoid
- Resetting the clock without noticing. Refinancing a 25-year-remaining loan into a new 30-year loan can raise total interest even at a lower rate.
- Judging only by the monthly payment. A lower payment from a longer term is not the same as saving money.
- Rolling closing costs into the balance and ignoring them. They still push out your break-even point.
- Refinancing right before moving. If you sell before break-even, you lose money on the deal.