⚠️ Note: This tool provides financial estimates. It is not a substitute for professional advice. Always verify with a certified accountant or advisor.
What is Refinance Savings Calculator: Break-Even Analysis?
Refinancing involves replacing an existing loan with a new one, usually to secure a lower interest rate. This calculator compares your current loan terms against a new offer to calculate the 'Break-Even Point'—the time it takes for your monthly savings to outweigh the upfront costs of switching.
How it Works
1. Calculate Current Monthly Payment. 2. Calculate New Monthly Payment. 3. Find Monthly Savings (Current - New). 4. Divide Total Closing Costs by Monthly Savings to find the number of months to break even.
Step-by-Step Guide
- Current Loan – Input your current monthly P&I payment.
- New Loan Offer – Enter the new loan amount, rate, and term.
- Closing Costs – Input total fees for the new loan (appraisal, origination, etc.).
- Analyze – The tool calculates your break-even horizon.
Example
Input: Save $200/mo, Pay $3,000 Costs
Result: 15 Months to Break Even
FAQ
What are typical closing costs?
Usually 2% to 5% of the loan amount.
Is a lower rate always better?
Not always. If you extend the term (e.g., back to 30 years), you might pay more total interest even with a lower rate.
Does this affect credit score?
Yes, applying for a refinance causes a hard inquiry, dipping your score slightly temporarily.
Can I roll costs into the loan?
Yes ('No-closing-cost refi'), but this increases your loan balance and interest paid.
Cash-out refinance?
This tool focuses on rate/term savings. Cash-out involves taking equity, increasing debt.
Conclusion
Refinancing is an investment decision. If you plan to stay in the home longer than the break-even period, refinancing is profitable. If you might move sooner, the upfront costs will result in a net loss despite the lower interest rate.