Loan Refinance Savings Calculator

How a refinance saves (or costs) money

A refinance replaces an existing loan with a new one at a different rate, usually with closing costs paid upfront. The lifetime saving from a lower rate compounds month-by-month over the remaining term; the closing costs are paid once at the start. Whether the refinance is net positive depends on how those two numbers stack against each other and on how long the borrower expects to keep the new loan. The break-even month is where the running monthly savings have repaid the closing costs in full — past that point, the refinance is net positive in cash terms.

How to use it

Enter the current outstanding balance, the current rate, the new rate available, the years remaining on the existing loan, and the upfront closing costs. The calculator returns net lifetime savings (after fees), monthly savings, gross lifetime savings (before fees), and the break-even month count. The currency selector at the top of the calculator changes formatting throughout — the math itself is currency-neutral.

Worked example

Picture a 250,000 outstanding balance at 7% with 25 years remaining, refinancing to 5.5% with 3,500 in closing costs (currency follows the selector). The old monthly payment is around 1,766.95; the new is around 1,535.22. Monthly savings: about 231.73. Over 25 years (300 months), gross savings come to around 69,518.78. Subtracting the 3,500 closing costs gives net lifetime savings of 66,018.78. Break-even arrives at month 16 — closing costs are repaid by month 16 and every month after that is net positive.

How the math works

For each rate, monthly payment = balance × r ÷ (1 − (1 + r)⁻ⁿ) where r is the monthly rate (annual ÷ 12 ÷ 100) and n is months remaining. Monthly savings = old payment − new payment. Gross lifetime savings = monthly savings × n. Net lifetime savings = gross lifetime savings − closing costs. Break-even months = ceil(closing costs ÷ monthly savings). The model assumes the new loan keeps the same remaining term as the existing loan; refinancing to a longer term changes the comparison and would need a separate calculation.

How break-even relates to the hold horizon

Break-even months on a refinance is the time required for the monthly saving to repay the closing costs. If the hold horizon (how long the borrower expects to keep the loan) is shorter than the break-even, the refinance is net negative in cash terms; if the hold horizon is longer, it's net positive. For mortgages this often means the decision turns on whether the homeowner expects to stay in the property long enough for the savings to accumulate; for personal loans and auto loans, it usually depends on whether the loan will be held to maturity or paid off early. Some borrowers add a safety margin and only refinance when the expected hold horizon meaningfully exceeds the break-even — the size of the margin depends on the borrower's confidence in the timeline.

Where closing costs come from

Closing costs typically bundle origination fees, appraisal fees, title insurance, processing charges, and prepayment penalties on the existing loan if any. As an orientation seen in consumer-credit literature, mortgage closing costs commonly run 2-5% of the balance; personal-loan refinances often have lower fees; auto refinances tend to have minimal fees. Specific cutoffs vary by lender, country, and product type — the lender's fee disclosure or loan-estimate document is the authoritative source.

What this calculator doesn't capture

The model assumes a fixed rate on both old and new loans, equal monthly payments, no PMI or escrow changes, and the same remaining term on both. Tax treatment of mortgage interest (deductible in some jurisdictions, not in others), variable-rate behaviour, prepayment penalties on the existing loan that aren't bundled into closing costs, and lender insurance products are all outside this calculation. The figures are an estimate of the headline net saving based on the five inputs entered.