Refinance Calculator

How the Refinance Calculator works

Refinance calculator formula

Both payments come from the amortization formula, Payment = balance × r ÷ (1 − (1 + r)^−n). The refinance calculator then works out:

Break-even months = refinance costs ÷ (current payment − new payment)

Lifetime saving = current interest remaining − new interest − refinance costs

If you plan to sell or move before the break-even month, refinancing loses money. Stretching the term lowers the payment but can wipe out most of the lifetime saving.

Worked example: same term, lower rate

250,000 at 7% with 25 years left costs 1,766.95 a month. Refinancing to 5.5% over 25 years costs 1,535.22, saving 231.73 a month. With 4,000 of costs, break-even comes in 18 months, and the lifetime saving is 65,518.78.

Worked example: resetting to 30 years

Take the same loan to 5.5% over 30 years instead. The payment drops to 1,419.47, saving 347.48 a month and breaking even in 12 months, but the longer term means 261,010.10 of interest and a lifetime saving of only 15,074.30. The table shows how many months each new rate takes to break even.

Refinance reference table

A 250,000 loan at 7% with 25 years left, refinanced over 25 years at new rates from 2% to 6.75%, with 4,000 of costs.

Quick answers

• Divide the costs by the monthly saving to find the break-even month.
• A 1.5-point rate cut on 250,000 saves about 230 a month over 25 years.
• A longer new term lowers the payment but often raises total interest.
• Refinancing only pays if you keep the loan past break-even.
• Rolled-in costs increase the new balance; enter them as costs here.

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