How to Use This Calculator
- 1
Enter your current and new loan details
Fill in your current loan's remaining balance, interest rate, monthly payment, and remaining payments. Then enter the new loan amount, interest rate, term, and refinancing costs.
- 2
Review your refinancing comparison
Click Calculate to see three result cards: Total Savings, New Monthly Payment, and Break-Even Period, plus an insights card with interest savings, cost breakdowns, and total loan costs.
Example Calculation
A homeowner considers refinancing their $95,000 remaining mortgage at 6.5% (300 payments left, $632/mo) to a new 30-year loan at 5% with $3,000 in closing costs.
Current Remaining Balance ($)
95,000
Current Interest Rate (%)
6.5
Current Monthly Payment ($)
632
Current Remaining Payments
300
New Loan Amount ($)
95,000
New Interest Rate (%)
5
New Loan Term (years)
30
Refinancing Costs ($)
3,000
Results
Total Savings
$10,324.81
New Monthly Payment
$509.98 (Save $122.02/mo)
Break-Even Period
24.6 months (3 yrs to recoup $3,000 in closing costs)
Insights card shows interest savings of $13,324.
Tips
Higher closing costs extend your break-even
Increasing refinancing costs from $3,000 to $5,000 on the same $95,000 loan pushes the break-even period from 24.6 months to 41.0 months. Make sure you will hold the loan past that point before committing.
A shorter term saves far more interest
Refinancing the $95,000 balance into a 20-year loan at 5% instead of 30 years raises your payment from $509.98 to $626.96/mo, but cuts total interest from $88,593 to $55,470 -- saving $33,123 in interest.
Invest your monthly savings for compounding gains
The $122.02/mo you save by refinancing could grow to $149,729 over 30 years if invested at a 7% annual return, turning a $10,325 loan savings into a much larger wealth-building opportunity.
Small rate drops may not justify new costs
Dropping from 6.5% to only 6.0% on a $95,000 loan saves just $62.43/mo, pushing the break-even to 48.1 months with $3,000 in costs. With a 30-year extension, you actually pay $11,128 more overall.
The Amortization Formula Behind Loan Comparison
The calculator uses the standard amortization formula to determine payments for both loans:
M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1]
Where P is the principal, i is the monthly interest rate (annual rate / 12), and n is the total number of monthly payments.
It then simulates both loans month-by-month, tracking cumulative interest and total payments to determine the true financial difference after including refinancing costs.
Worked Example: $95,000 Mortgage Refinance
Consider a homeowner with $95,000 remaining at 6.5%, paying $632/mo with 300 payments left, exploring a new 30-year loan at 5% with $3,000 in closing costs.
| Metric | Current Loan | New Loan |
|---|---|---|
| Monthly Payment | $632.00 | $509.98 |
| Total Interest | $101,917.81 | $88,593.00 |
| Total Cost | $196,917.81 | $186,593.00 |
| Monthly Savings | -- | $122.02 |
| Break-Even | -- | 24.6 months |
| Net Savings | -- | $10,324.81 |
The new payment is calculated as: $95,000 x [0.004167 x (1.004167)^360] / [(1.004167)^360 - 1] = $509.98/mo.
Break-even = $3,000 / $122.02 = 24.6 months.
Total savings = $196,917.81 - $186,593.00 = $10,324.81.
When Refinancing Costs More Than It Saves
Not every rate drop justifies refinancing.
Extending a near-finished loan to a new 30-year term can wipe out interest savings.
For instance, dropping from 6.5% to 6.0% on the same $95,000 balance saves only $62.43/mo, but stretching to 360 payments costs $11,128 more overall.
Always check total savings, not just the monthly payment reduction.
Frequently Asked Questions
What is the break-even point in refinancing?
The break-even point is the number of months it takes for your monthly payment savings to offset the closing costs of refinancing. For example, if refinancing saves you $200/month and costs $4,000, the break-even is 20 months. If you stay beyond 20 months, refinancing saves you money.
Should I refinance if I plan to move in a few years?
Calculate the break-even point first. If you plan to move in 3 years (36 months) and the break-even is 24 months, refinancing may still be worthwhile since you will enjoy 12 months of net savings. If break-even is 40 months, refinancing would cost you money.
Can I refinance into a shorter term?
Yes, and it often makes financial sense. Refinancing from a 30-year to a 15-year loan typically offers a lower interest rate and dramatically reduces total interest paid, though monthly payments will be higher. This calculator helps you compare both scenarios.
What costs should I include in refinancing costs?
Include application fees, appraisal fees, title search and insurance, attorney fees, origination fees, recording fees, and any prepayment penalties on your current loan. These typically total 2-5% of the loan amount.
Does this calculator account for the time value of money?
This calculator provides a straightforward comparison of total payments and savings without discounting future cash flows. For a more sophisticated analysis, consider that dollars saved in the future are worth less than dollars today due to inflation.