EN

Refinance Calculator

This refinance calculator compares your current loan with a new one: the payment, the total interest and the point at which the cost of switching pays for itself. Example: refinancing 200,000 from 6.5% to 5.5% cuts the payment by 122.24 a month, and 4,000 in costs is recovered after 33 months.

Source: Annuity formula for the monthly payment (Brealey/Myers/Allen: Principles of Corporate Finance); presentation: Wikipedia “Amortization calculator”. Updated: .

The amount still owed today that will be refinanced.
% per year
years
% per year
years
For example closing costs, fees, appraisal or a prepayment penalty.
My ToolboxYour inputs are saved in this browser only.

Result

Result
New payment 1,228.17 instead of 1,350.41: 122.24 less per month · costs recovered after 33 months
Current loan vs new loan
FigureCurrent loanNew loan
Monthly payment1,350.411,228.17
Term in months300300
Total interest205,124.30168,452.50
All payments (new: plus costs)405,124.30372,452.50
Working
  • Current payment: 200,000.00 × i ÷ (1 − (1 + i)^−300) with i = 6.5% ÷ 12 gives 1,350.41.
  • New payment: 200,000.00 × i ÷ (1 − (1 + i)^−300) with i = 5.5% ÷ 12 gives 1,228.17.
  • Break-even: 4,000.00 ÷ 122.24 = 32.7, so the costs are recovered after 33 months.
  • Overall comparison: 405,124.30 − 368,452.50 − 4,000.00 = 32,671.80.
Over the full term you pay 32,671.80 less. This is pure arithmetic with fixed rates: fees, prepayment penalties and taxes depend on your country and contract – enter every one-off cost above.

How it is calculated

Refinancing replaces an existing loan with a new one – usually to get a lower rate, a smaller payment or a different term. Whether it is worth it comes down to three numbers: the monthly saving, the interest over the whole term and the one-off cost of switching.

Formulas

Monthly payment = balance × i ÷ (1 − (1 + i)^−n), with i = annual rate ÷ 12 and n months. Total interest = payment × n − balance. Break-even = one-off costs ÷ monthly saving, rounded up to whole months. Overall comparison = sum of the old payments − sum of the new payments − costs.

Worked example

Balance 200,000, currently 6.5% with 25 years left, new loan at 5.5% over 25 years as well, costs 4,000. The payment falls from 1,350.41 to 1,228.17, a saving of 122.24 a month. Break-even: 4,000 ÷ 122.24 = 32.7 – the costs are recovered after 33 months. Total interest drops from 205,124.30 to 168,452.50; after deducting the costs you are 32,671.80 better off.

Watch out for a longer term

If the same loan is stretched to 30 years, the payment falls even further to 1,135.58 and the costs are recovered after only 19 months. Over the full term, however, you pay 7,683.78 more than before, because interest accrues for five more years.

Frequently asked questions

When is refinancing worth it?

On paper, when you keep the loan beyond the break-even point and the total cost goes down. The calculator shows both: the months until the costs are recovered and the comparison over the full term.

How do you calculate the break-even point?

Divide the one-off costs by the monthly saving. In the example: 4,000 ÷ 122.24 = 32.7, so 33 months.

Why can a lower payment cost more overall?

Because a longer term means more months of interest. In the example with 30 instead of 25 years the payment is lower, but the total is 7,683.78 higher.

What belongs in the costs field?

Everything that arises only because of the switch: fees charged by the old and the new lender, a prepayment penalty, appraisal, title or legal fees. What applies is set out in your contract.

Sources and legal basis

As of: · Editorial policy

Related tools