How to Calculate True Refinancing Savings
Refinancing saves money through a lower interest rate, but upfront costs (closing costs and prepayment penalties) reduce the actual benefit. The true savings is the interest reduction minus all upfront costs.
Break-Even Analysis
Divide total upfront costs by the monthly savings to find how many months it takes to recoup the cost. If you plan to keep the loan longer than the break-even point, refinancing makes financial sense.
When to Refinance
A general rule of thumb: refinancing is worth it if you can reduce your rate by at least 0.5–1% and you plan to stay in the home long enough to pass the break-even point. This calculator gives you the exact numbers.
Frequently Asked Questions
Not necessarily. Refinancing to a shorter term (e.g., from 30 to 15 years) can save more interest but increases monthly payments. This calculator assumes you keep the same remaining term.
Yes. Some lenders offer no-closing-cost refinancing where costs are rolled into the loan balance or reflected in a slightly higher rate. Compare both options to see which gives better long-term savings.