Refinance Calculator
Should you refinance your mortgage? Calculate your monthly savings, find the break-even point, and compare the total lifetime cost of staying vs refinancing.
Try a scenario
How to Use This Calculator
Tab "Monthly Savings"
Enter your current loan balance, current rate, and remaining term. Then enter the new rate, new term, and closing costs. The result shows your new monthly payment, monthly savings, and annual savings — the immediate cash-flow impact of refinancing.
Tab "Break-Even"
Using the same inputs, the calculator divides your closing costs by your monthly savings to find the break-even point — the number of months you must stay in the home for refinancing to pay off. If you move or pay off the loan before that month, refinancing costs you money on net.
Tab "Lifetime Cost"
Compares the total remaining payments on your current loan versus the total payments plus closing costs on the new loan. This is the definitive answer to "does refinancing save money over the full life of the loan?" — especially useful when you are extending or shortening the term.
The Formulas
PMT = P × r_m × (1 + r_m)^n / ((1 + r_m)^n − 1)
where P = loan balance, r_m = annual rate / 12, n = total months
Monthly savings:
Monthly savings = Current PMT − New PMT
Break-even point:
Break-even months = Closing costs / Monthly savings
Lifetime cost (current loan):
Total remaining = Current PMT × Remaining months
Lifetime cost (new loan):
New total = New PMT × New term months + Closing costs
Net lifetime savings:
Net savings = Total remaining (current) − New total (refinanced)
All calculations use standard amortisation mathematics. No country-specific tax rates or insurance are applied. Results are pre-tax estimates.
Worked Examples
Example 1 — Monthly Savings: $300K at 6.5%, 27 years left → 5.0%, 30 years, $6,000 closing
A homeowner has $300,000 remaining on a 6.5% mortgage with 27 years left. They are offered 5.0% for 30 years with $6,000 in closing costs.
Refinancing drops the monthly payment by $356. The lower rate and fresh 30-year term both contribute — the rate saves interest, the extended term spreads principal over more payments.
Example 2 — Break-Even: $6,000 closing costs / $356/month savings = 16.8 months
Using the same scenario: closing costs of $6,000 divided by monthly savings of $356.20 gives a break-even point of 16.8 months.
At under 17 months, this is a fast break-even — most homeowners planning to stay 2+ years would benefit from this refinance.
Example 3 — Lifetime Cost: current total $637,199 vs refinanced $585,767 (incl. $6K closing) = $51,432 net savings
Comparing the total cost of the two options over their full remaining terms:
Even though the new loan extends the term by 3 years, the lower rate produces $51,432 in net lifetime savings. The key insight: the rate reduction more than compensates for the longer term in this example. Always check the Lifetime Cost tab before deciding, since extending the term does not always save money.
Should You Refinance? Key Decision Factors
The Break-Even Rule
The single most important question is: how long do you plan to stay? If you plan to sell or move before your break-even point, refinancing guarantees a loss. Closing costs are paid upfront and are not recoverable. Most financial advisers suggest the break-even should be under 24 months to justify refinancing — but the right threshold depends on your personal timeline.
Rate Reduction — How Much Is Enough?
A popular rule of thumb says you need at least a 1 percentage point reduction to justify refinancing. In practice the threshold depends on your loan size and closing costs. On a large balance ($500K), even a 0.5 point drop may produce a sub-12-month break-even. On a small balance ($100K), you may need a 1.5 point drop to justify $4,000 in closing costs. Always calculate — don't rely on rules of thumb.
Extending the Term: Lower Payment vs Higher Total Cost
Refinancing into a longer term (say from 15 years remaining into a new 30-year loan) will always lower your monthly payment. But it may not save money over the life of the loan — you are paying interest for more months. Use the Lifetime Cost tab to see the full picture. In some cases extending the term significantly increases total interest paid even if the rate drops.
Shortening the Term
Refinancing from a 30-year loan to a 15-year loan typically comes with a lower rate and dramatically less total interest, but a higher monthly payment. The Lifetime Cost tab will show the total savings; use the Monthly Savings tab to confirm the new payment is affordable.
No-Closing-Cost Refinancing
Some lenders offer refinancing with no upfront closing costs, but recover them by either rolling the costs into the loan balance (increasing your principal) or offering a slightly higher rate. A "no-cost" refinance makes the break-even essentially immediate — but you pay a small ongoing premium. This option is best for borrowers who are uncertain about how long they will stay.
Cash-Out Refinancing
A cash-out refinance replaces your mortgage with a larger loan and gives you the difference in cash. This calculator does not model cash-out scenarios — for that use our Amortisation Calculator with the new (larger) balance.
Frequently Asked Questions
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