What the calculator compares
It works out the payment on your current loan, using the balance, rate and years remaining, and the payment on a new loan at the new rate and term. The difference is your monthly change. Closing costs are then compared with that difference to find the break-even time.
The lifetime comparison adds up every remaining payment on the current loan and every payment on the new one, plus the up-front costs.
A worked example
A 250,000 balance at 6.5% over 30 years costs 1,580.17 a month. Refinancing to 5.5% over 30 years costs 1,419.47, a saving of 160.70 a month. With 4,000 in closing costs, the break-even point is 4,000 ÷ 160.70, about 25 months.
If you keep the loan for ten years, you save much more than the fees. If you move within two years, you lose money. The same rate drop can be good or bad depending on how long you stay.
When refinancing can backfire
Restarting a long term resets the clock, so you may pay interest for many more years. Prepayment charges on the old loan, higher fees and a loss of fixed-rate protection can also cancel the benefit.
If your goal is to repay faster, a shorter new term raises the payment but often saves a lot of interest.
Limits to keep in mind
Rates, fees and rules differ by lender and country. This is a comparison tool, not a quote. Ask your lender for a written estimate before deciding.
Questions people ask
How do I know if refinancing is worth it?
Compare the monthly saving with the closing costs. Divide the costs by the saving to get the break-even time. If you will keep the loan well beyond that, refinancing is likely to pay off. Also check the total cost over the whole loan.
What are closing costs on a refinance?
They are fees to set up the new loan, such as lender, valuation, legal and registration fees. They vary widely by country and lender, so use the figure on your loan quote or estimate.
Does a longer term save money?
It lowers the monthly payment but usually increases total interest, because you borrow for longer. The Lifetime tab shows the overall difference, which can be negative even when the monthly payment falls.
What is the break-even point?
It is the number of months until the monthly savings add up to the closing costs. Selling the home or refinancing again before that point means the fees were not recovered.
Can I roll the closing costs into the loan?
Many lenders allow this, but you then pay interest on the fees. This calculator assumes you pay them up front. To model rolling them in, add them to the loan balance and set closing costs to zero.