Refinance Calculator

How the refinance calculator works

This calculator compares your current loan against a hypothetical refinanced version, side by side. Enter the details of your existing loan (current balance, monthly payment, and rate) and the proposed new loan (rate, term, and any closing costs or origination fees). The calculator returns the monthly savings, the break-even point, and the lifetime difference in total cost.

Refinancing makes sense when the present value of the savings exceeds the upfront cost of refinancing — but only if you stay in the loan long enough to realize those savings. If you plan to sell, pay off, or refinance again before the break-even point, the upfront cost outweighs the monthly savings.

The break-even calculation, explained

The simple version of the break-even formula is:

Break-even months = Total upfront cost ÷ Monthly savings

Suppose you owe $250,000 on a mortgage at 7.5% with a $1,748 monthly payment. You can refinance to 6.25% with $5,000 in closing costs. The new monthly payment is about $1,539 — a saving of $209/month. Break-even = $5,000 ÷ $209 ≈ 24 months. If you plan to keep the home (and the new loan) for at least 2 years, refinancing saves money. If you'd sell within 18 months, the closing costs exceed the savings and refinancing doesn't make sense.

The cumulative savings math

Past the break-even point, every additional month produces pure savings. On the example above, keeping the refinanced mortgage for the full 30-year term saves about $75,000 in lifetime interest compared to staying on the original 7.5% loan — net of the $5,000 in closing costs. Most refinances pay back their costs many times over for borrowers who stay in the loan.

Worked example: personal loan refinance

Suppose you have a $15,000 personal loan from 18 months ago at 13% APR with $9,800 remaining balance and 42 months left. A new lender offers to refinance at 9% APR over 48 months with no fees:

Current loan: $9,800 balance, $315 monthly payment, $1,425 in remaining interest
New loan: $9,800 amount, $244 monthly payment, $1,912 in total interest over 48 months
Monthly savings: $71
Lifetime savings: actually negative if you take the longer term

Note the trap: extending the term often increases total interest even at a lower rate, because you're paying interest on the principal for longer. The right comparison is at the same term length: refinancing $9,800 at 9% over the original remaining 42 months (not 48) drops the payment to about $277 and saves about $260 in lifetime interest — modest, but a clean win.

When refinancing doesn't make sense

Rate gap is small. A 0.25–0.50 percentage point reduction is rarely enough to justify closing costs, especially on shorter-term personal loans.
Loan is nearly paid off. If you have less than 2 years remaining on the original loan, the closing costs typically exceed the savings.
You'll sell or pay off soon. Mortgage refinances especially make no sense if you plan to sell the home within 3 years of refinancing.
Term extension dominates. Refinancing into a longer term may lower the monthly payment but increase total interest. The "savings" are illusory.

Frequently asked questions

When should I refinance a loan?

When the new APR is at least 1 percentage point below your current rate, you have at least 2 years of payments remaining, and any closing costs or origination fees on the new loan can be recouped within a reasonable timeframe (typically 18-24 months for personal loans, 3-5 years for mortgages).

What is the break-even point on a refinance?

The break-even point is when the cumulative monthly savings from the lower rate equal the upfront cost of refinancing (closing costs, origination fees). If you plan to keep the loan past the break-even point, refinancing saves money. If you'd pay off or sell within the break-even window, refinancing usually doesn't make sense.

Will refinancing hurt my credit score?

Slightly and temporarily. The hard inquiry typically reduces your score 5–10 points, and the new account briefly lowers your average account age. Both effects fade within 6 months. The interest savings dwarf the temporary score impact for most borrowers.

Can I refinance a loan with bad credit?

Sometimes, but the savings are typically smaller. If your current rate was set when your credit was bad and your credit has improved meaningfully, refinancing can produce real savings. If your credit is similar or worse than when you took the original loan, refinancing is less likely to help.

Are there fees to refinance a personal loan?

Some lenders charge origination fees on the new loan (typically 1–10% of the new loan amount). Others charge no fees. Always compare the all-in APR (including fees) of the new loan to the rate on your existing loan, not just the headline rates.

Should I refinance a 30-year mortgage to a 15-year mortgage?

If you can comfortably afford the higher monthly payment, yes — 15-year mortgages typically price 50-100 basis points below 30-year mortgages and save enormous lifetime interest. The trade-off is the higher monthly payment commitment, which reduces your financial flexibility.

Related guides and calculators

Disclaimer. This calculator is for educational purposes. The break-even analysis depends on accurate inputs for your current loan and the proposed new loan. Actual refinance offers may include closing costs, origination fees, prepayment penalties on the existing loan, or other costs not modeled here. Confirm all terms directly with the lender before signing.