What Is Loan Refinancing?
Refinancing means replacing your existing loan with a new loan — usually at a lower interest rate, a different term, or both. The new loan pays off your old balance, and you then repay the new loan under its own terms. Done well, refinancing lowers your monthly payment and reduces the total interest you pay over time.
This calculator compares your current loan (your outstanding balance, current rate and remaining term) with a new loan (the offered rate, the new term and any closing costs). In one click you see the monthly savings, how long it takes to recover the closing costs (the break-even point), and the total interest you stand to save.
How to Use the Refinance Calculator
- Enter your current loan balance. This is the principal you still owe today, not what you originally borrowed.
- Enter your current rate and remaining term. Use the yearly rate as a percentage (e.g. 7.5 for 7.5%) and the years left on the loan.
- Enter the new loan rate and term. These come from your refinance offer or the current market rates.
- Enter closing costs. Include origination fees, appraisal, title and any other upfront costs of the new loan.
- Click “Compare Loans”. The tool shows your monthly savings, break-even months, total interest saved and a side-by-side comparison schedule.
How the Refinance Math Works
Where P is the outstanding balance, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments. The calculator runs this once for your current loan and once for the new loan. The monthly savings is the difference between the two payments, and the break-even point is the closing costs divided by that monthly savings.
Understanding the Break-Even Point
The break-even point answers the key question: how many months until the savings cover the closing costs? If you expect to stay in the loan longer than the break-even point, refinancing is likely worth it. If you plan to sell or pay off sooner, the upfront closing costs may not be worth recovering.
Total Interest Saved
Total interest saved is the difference between the interest you would pay on your current loan and the interest on the new loan. Remember that extending the term can raise total interest even when the monthly payment drops, so always compare the totals, not just the monthly numbers.
Frequently Asked Questions
What is a loan refinance calculator?
A loan refinance calculator compares your current loan with a new loan (lower rate, different term) and shows the monthly savings, the break-even point where closing costs are recovered, and the total interest you could save over the life of the loan.
How do I know if refinancing is worth it?
Refinancing is worth it when the total savings from the new loan exceed the closing costs you pay upfront. Use the break-even months: if you plan to keep the loan longer than the break-even point, refinancing usually makes sense.
What is the break-even point in refinancing?
The break-even point is the number of months it takes for your monthly savings to cover the closing costs of the new loan. After that point, the refinance starts to actually save you money.
Is this calculator 100% free?
Yes. The loan refinance calculator is completely free for unlimited use with no sign-up, no hidden fees and no premium limits.
Does the tool store my financial data?
No. All calculations run locally in your browser. Your loan balance, rates, term and closing costs are never uploaded or stored on any server.