Refinance Savings Calculator

Refinancing replaces your current loan with a new one—typically at a different interest rate, term, or both. Whether you have a mortgage, auto loan, or student loan, refinancing can potentially save you thousands of dollars over time. But it's not always the right move. The key is understanding whether the savings outweigh the costs, and that's exactly what this calculator helps you determine.

Many homeowners rush to refinance whenever rates drop, only to discover that closing costs eat into their savings—or that they won't stay in the home long enough to break even. Others miss opportunities to save because they don't realize how significant the interest difference can be over 15-30 years. This tool gives you clarity by showing the complete picture: monthly payment changes, total interest costs, and the critical breakeven point.

Beyond mortgages, refinancing applies to car loans (where even a 1-2% rate drop can save hundreds), student loans (especially private loans with high rates), and personal loans. The math is similar: compare your current loan's remaining cost to the new loan's total cost, factor in fees, and determine if the switch makes financial sense. Use our Loan Comparison Calculator to compare multiple loan offers side-by-side.

Whether you're a first-time homeowner wondering if today's rates warrant refinancing, a student looking to consolidate loans, or simply someone who wants to lower their monthly payment, this calculator provides the data-driven answer you need to make a confident decision.

What Happens When You Refinance?

When you refinance, a new lender (or sometimes your current lender) pays off your existing loan in full. You then owe the new lender instead, making payments under new terms—different interest rate, different term length, or both. Your old loan is closed, and you start fresh with the new one. The process typically involves an application, credit check, appraisal (for mortgages), and closing—similar to getting the original loan.

Rate-and-Term vs. Cash-Out Refinancing

Rate-and-Term Refinance: You're replacing your loan with a new one primarily to change the interest rate, loan term, or both. Your loan balance stays roughly the same (minus any principal you've paid). This calculator focuses on this type.

Cash-Out Refinance: You borrow more than your current balance and receive the difference as cash. This increases your loan amount but gives you funds for renovations, debt consolidation, or other purposes. Cash-out refinancing has different considerations not fully covered by this calculator.

Closing Costs: The Hidden Factor

Refinancing isn't free. Closing costs typically range from 2-5% of the loan amount for mortgages ($4,000-$10,000 on a $200,000 loan). These include appraisal fees, title insurance, origination fees, and more. For auto loans, fees are usually lower ($100-$500). You must recover these costs through monthly savings for refinancing to be worthwhile.

The Breakeven Point Explained

The breakeven point is when your monthly savings have covered the closing costs. Breakeven = Closing Costs ÷ Monthly Savings. If closing costs are $6,000 and you save $200/month, breakeven is 30 months. If you sell or refinance again before 30 months, you lose money. If you stay longer, you profit.

Step 1: Enter Your Current Loan Details

Select your loan type (mortgage, auto, student, or personal). Enter your current loan balance—the amount you still owe, not the original loan amount. Input your current APR (find this on your statement or by calling your lender) and remaining term in years. You can optionally enter your exact current payment if you know it.

Step 2: Enter the New Loan Terms

Input the interest rate you've been quoted for the new loan. Enter the new loan term—this could be the same, shorter, or longer than your remaining term. A shorter term means higher payments but less total interest. A longer term means lower payments but potentially more interest over time.

Step 3: Add Closing Costs

Enter the estimated closing costs. Ask your lender for a Loan Estimate, which breaks down all fees. Choose whether you'll pay closing costs upfront (out of pocket) or roll them into the loan. Rolling costs in means you pay interest on them over time.

Step 4: Analyze Your Results

The calculator shows your old vs. new monthly payment, total interest for each scenario, the breakeven point, and whether refinancing saves money overall. The visual charts help you see how balances decrease over time with each option.

Step 5: Ask the AI Assistant

Use the AI assistant for personalized guidance. Ask questions like "Should I refinance with these numbers?" or "What if I stay only 3 more years?" to get insights tailored to your situation.

Monthly Payment Formula

Loan payments are calculated using the amortization formula:

Where P = principal (loan balance), r = monthly interest rate (APR ÷ 12), and n = number of payments (years × 12). Even a small change in 'r' significantly impacts the payment and total interest over time.

Why Interest Rate Changes Matter So Much

Consider a $300,000 mortgage. At 7% for 30 years, you pay $718,527 total ($418,527 in interest). At 6% for 30 years, you pay $647,515 total ($347,515 in interest). That 1% difference saves $71,000 over the loan's life—roughly $197/month.

The Term Length Trade-Off

Shorter term (e.g., 30 → 15 years): Higher monthly payment, but much less total interest. You build equity faster.

Longer term (e.g., 15 → 30 years): Lower monthly payment, but more total interest—even with a lower rate. The extra years of payments add up.

True Cost Comparison

To compare accurately, calculate: (Current remaining payments × Current monthly payment) vs. (New loan payments × New monthly payment + Closing costs). The difference is your true savings (or loss). This calculator does this math for you.

Scenario 1: Rate Drop After Buying at Peak

Situation: Maria bought her home at 7.5% APR. Two years later, rates have dropped to 6%. She has $280,000 remaining on a 30-year mortgage with 28 years left. Closing costs would be $7,000.

Analysis: Her current payment is $1,958. Refinancing to 6% for 30 years drops it to $1,679—saving $279/month. Breakeven: 25 months. If she stays 5+ years, she saves over $9,700 (after closing costs).

Verdict: ✅ Refinance makes sense—significant savings, reasonable breakeven, plans to stay long-term.

Scenario 2: Shortening the Term

Situation: David has $200,000 at 6.5% with 25 years remaining. He got a raise and can afford higher payments. A 15-year refinance at 5.75% is available with $4,500 closing costs.

Analysis: Current payment: $1,352. New 15-year payment: $1,661. He pays $309 more monthly but saves $95,000 in total interest and is mortgage-free 10 years sooner.

Verdict: ✅ Excellent move if he can afford the higher payment— massive long-term savings.

Scenario 3: Auto Loan Refinance

Situation: Jake has $18,000 left on his car loan at 9% with 4 years remaining. His credit has improved, and he qualifies for 5.5%. Refinance fee: $200.

Analysis: Current payment: $448. New payment: $418. Saves $30/month and $1,240 total interest. Breakeven: 7 months. Over 4 years, net savings: $1,040.

Verdict: ✅ Easy decision—low fees, quick breakeven, meaningful savings.

Scenario 4: Moving Soon—Should You Still Refinance?

Situation: Emma might move in 2-3 years. She could save $250/month by refinancing, but closing costs are $8,000.

Analysis: Breakeven: 32 months. If she moves in 24 months, she's lost $2,000 ($6,000 saved - $8,000 costs). If she stays 36 months, she saves $1,000.

Verdict: ⚠️ Risky. Only refinance if confident she'll stay 3+ years.

Scenario 5: Student Loan Consolidation

Situation: Alex has $45,000 in private student loans averaging 8.5% APR. A refinance offers 5.5% with no fees.

Analysis: On a 10-year term, payments drop from $557 to $489—saving $68/month and $8,160 total. No breakeven period since there are no closing costs. Plan your student loan payoff with our Student Loan Payoff Calculator.

Verdict: ✅ No-brainer—immediate savings with no upfront cost.

Scenario 6: The Term Extension Trap

Situation: Lisa has 20 years left at 6% on $180,000. She refinances to 5.5% but takes a new 30-year term to lower her payment.

Analysis: Payment drops from $1,290 to $1,022—saving $268/month. But total interest goes from $129,600 to $187,920. She pays $58,000 MORE over time.

Verdict: ❌ Bad deal despite lower payment. If she needs cash flow, consider a shorter extension or other options.

• ❌ Focusing only on monthly payment: A lower payment feels great, but if you're extending your term, you might pay tens of thousands more in total interest. Always compare the total cost of both loans, not just the monthly payment.
• ❌ Ignoring breakeven when planning to move: If you'll likely sell or move before reaching breakeven, refinancing costs you money. Be honest about your timeline before committing.
• ❌ Rolling closing costs without understanding the impact:Adding $8,000 in closing costs to your loan means paying interest on that $8,000 for 30 years. On a $300K mortgage at 6%, that $8,000 becomes ~$17,300 over 30 years.
• ❌ Refinancing too often: Each refinance has closing costs. If you refinance every time rates drop 0.25%, the cumulative fees can outweigh savings. Wait for a meaningful rate drop (typically 0.75-1%+).
• ❌ Not shopping around: Different lenders offer different rates and fees. Get quotes from at least 3-4 lenders. A 0.25% rate difference seems small but adds up to thousands over time.
• ❌ Resetting a nearly paid-off loan: If you have 8 years left on a mortgage, refinancing to a new 30-year term for a lower payment is usually a bad idea—you're almost done! Consider just paying extra instead.
• ❌ Forgetting about PMI: If your refinance reduces your equity below 20% (from cash-out or rolled-in costs), you may trigger private mortgage insurance, adding hundreds per month.

1. The "Keep Your Payment" Strategy

If you refinance to a lower rate, keep paying your old (higher) payment amount. The extra goes to principal. You'll pay off the loan years early and save significantly more interest than the standard new payment would.

2. Match Your Term to Your Plans

If you plan to retire in 15 years, consider a 15-year refinance even if payments are higher. Being mortgage-free at retirement provides enormous peace of mind and flexibility.

3. Consider No-Closing-Cost Refinances

Some lenders offer "no closing cost" refinances by charging a slightly higher rate. If your breakeven on a standard refinance is long, or you're unsure how long you'll stay, no-cost refinances can make sense—you start saving immediately with no upfront risk.

4. Time Your Refinance with Rate Trends

Rates fluctuate. If rates are falling, waiting a bit might get you a better deal. If rates are rising, lock in quickly. Follow Federal Reserve announcements and economic indicators for directional guidance.

5. Improve Your Credit Score First

A higher credit score gets you better rates. If your score has improved since your original loan, you may qualify for significantly lower rates. Consider waiting a few months to improve your score if you're on the borderline of a rate tier.

6. Use Refinancing to Remove PMI

If your home has appreciated and you now have 20%+ equity, refinancing can eliminate PMI—potentially saving $100-$400/month even without a rate change. Get an appraisal to confirm your home's current value.

7. Bundle with Rate Lock

Lock your rate as soon as you find a good one. Rate locks typically last 30-60 days. If rates rise during your application process, you're protected. Some lenders offer "float down" options if rates drop after you lock.