Refinance Calculator Guide
A refinance calculator estimates monthly savings, total interest saved, and the break-even point when replacing your current loan with a new one. Enter current balance, remaining term, and APR, then the proposed rate, term, and costs.
What is Refinance Calculator?
The refinance calculator models your existing amortization against a proposed loan so you can see if lower APR or a shorter term offsets closing costs and how long it takes to break even.
How to Use the Refinance Calculator
- Enter current loan: balance, APR, and remaining term.
- Enter new loan: APR, term, and closing costs (paid up front or rolled in).
- Calculate new payment, monthly savings, total interest saved, and break-even months.
- Test options: shorter term, points, or cost roll-in.
- Decide based on savings and your time horizon in the home.
Formulas & Methods
- Monthly payment:
PMT = P*r / (1 - (1 + r)^(-n)),r = APR/12. - Monthly savings:
Savings = PMT_old - PMT_new(for same remaining term). - Break-even (months):
= Costs / Savings(if rolling costs in, Costs increase P). - Total interest saved: compare sum of interest remaining in old vs new schedule.
- Effective APR with points/costs: compute IRR/XIRR of cash flows for a fair comparison.
Assumptions & limitations
- Fixed-rate model; ARMs require rate path assumptions.
- Taxes and insurance do not change with refinance except escrows.
- Prepayment penalties or reset fees are not included unless entered as costs.
Examples
Example A — Rate drop
Old: P=$320,000, APR 6.5%, n=300. New: APR 5.75%, n=300, Costs=$4,500.
Payments drop by ~$150/mo; break-even = 4,500/150 = 30 months. If you plan to stay >30 months, it likely pays off.
Example B — Shorten term
Refi to 15-year at 5.25% increases payment but reduces total interest massively; use calculator to see lifetime savings.
| Metric | Old | New | |---|---:|---:| | Payment | higher | lower | | Total interest remaining | higher | lower | | Break-even | — | months |
Pro Tips & Best Practices
- Avoid resetting to a full 30 years late in a loan unless cash flow is the priority.
- Compare no-cost refi offers (rate slightly higher) vs paying points.
- If you will move soon, choose the lower break-even option or skip refi.
- Keep emergency savings; do not drain cash to pay points unless returns justify it.
Related Calculators
FAQ
Q: How do I know if refinancing saves money?
A: Compare the interest saved from a lower rate against the closing costs. If savings exceed costs before you plan to move, refinancing can make sense.
Q: What is the break-even point?
A: The number of months for monthly savings to equal upfront costs: Break-even = Costs / Monthly_savings.
Q: Should I shorten the term?
A: Shorter terms raise payment but lower total interest a lot; choose the shortest term you can afford comfortably.
Q: Can I roll costs into the loan?
A: Yes, but it increases principal and slightly reduces the benefit; compare scenarios.
Q: Fixed vs ARM?
A: Fixed provides payment certainty; ARMs may start lower but can reset. Consider your time horizon and risk tolerance.
Compliance note: This article is for information only and not financial advice.
Call to Action
Enter your current and proposed loan details to see monthly savings and the break-even point—decide with numbers, not guesswork.