Refinance Calculator

How This Calculator Works

Refinancing replaces your current loan with a new one, usually to get a lower interest rate, a different term, or both. Enter your current loan’s remaining balance, rate, and years left, along with the new rate and term you’re being offered, and this calculator compares your monthly payment and lifetime interest under both loans — plus, if you add any closing costs, how long it takes for the monthly savings to pay those costs back.

A lower rate doesn’t automatically mean refinancing is worth it. Resetting the clock on a new 30-year term can lower your monthly payment while increasing the total interest you pay over the life of the loan, since you’re paying interest for longer. This calculator shows both the monthly cash-flow picture and the lifetime-interest picture side by side, since they can point in different directions.

The Formula

Both the current and new monthly payments use the standard fixed-rate amortization formula:

$$M = \vA{P} \times \frac{\vB{r}(1+\vB{r})^{\vC{n}}}{(1+\vB{r})^{\vC{n}} - 1}$$

where $\vB{r}$ is the monthly interest rate (annual rate ÷ 12) and $\vC{n}$ is the number of monthly payments remaining.

$$\vE{\text{Monthly Savings}} = \text{Current Payment} - \text{New Payment}$$ $$\text{Break-Even Months} = \frac{\vD{\text{Closing Costs}}}{\vE{\text{Monthly Savings}}}$$

Only when there are actual monthly savings to recoup costs with.

$$\text{Lifetime Interest Savings} = \text{Current Loan's Remaining Total Interest} - \text{New Loan's Total Interest}$$

This calculator assumes closing costs are paid out of pocket rather than rolled into the new loan balance — rolling them in would change the new payment itself, so keeping them separate keeps the break-even math exact for what you actually spend up front.

Worked Example

A $300,000 balance with 25 years remaining at 7%, refinancing into a new 30-year loan at 5.5%, with $4,000 in closing costs:

1. Current monthly payment (at 7%, 25 years left): about $2,120.
2. New monthly payment (at 5.5%, 30 years): about $1,703.
3. Monthly savings: about $417.
4. Break-even on the $4,000 closing costs: about 10 months.
5. Because the new term resets to 30 years (5 years longer than the 25 remaining), the lifetime interest comparison depends heavily on the rate drop — check your own numbers above, since a longer term can offset some or all of a lower rate’s savings.

Common Mistakes

• Only looking at the monthly payment drop. A lower monthly payment can still cost more in total interest if the new term resets to a longer payoff period — check the lifetime interest comparison, not just the monthly savings, before deciding.
• Ignoring closing costs when judging whether refinancing is worth it. A lower rate isn’t automatically a win if closing costs take years to break even on — especially if there’s a real chance of moving or selling before that point.
• Assuming the new term has to match the old loan’s original term. Refinancing into a shorter term than the remaining balance’s original schedule can save substantial interest even at a similar rate — it’s a genuinely separate lever from the interest rate itself.