Refinance Loan Calculator
Does refinancing pay off?
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How to use
Refinancing replaces your current loan with a new one at a lower rate. The catch is the closing fee: you only win if the monthly savings eventually cover that fee. This calculator computes the savings and the payback period so you can decide.
How to use
- Enter your current balance, current APR and months remaining.
- Enter the new APR and the closing fee quoted.
- Press Calculate to see monthly savings, lifetime savings and the payback months.
Example
You owe $18,000 at 7.5% with 48 months left — a payment of about $436. Refinancing the same balance at 4.9% for the same 48 months drops the payment to about $414, saving $22 a month. With a $400 fee, payback is about 18 months; if you keep the loan past that, you net roughly $630 over the term.
Formula
Monthly savings = old payment − new payment; net savings = old interest − (new interest + fee); payback = fee ÷ monthly savings.
Match the remaining term
The comparison holds the term constant at your remaining months. If the new loan resets to a longer term, the lower payment is partly a term illusion — compare total interest, not just the payment.
Rule of thumb
If payback lands under a year or two and you expect to keep the loan longer than that, refinancing is usually worth it. If you might sell or pay off early, the fee may never be recovered.
Credit score changes the deal
The new rate you actually qualify for depends on your credit score at application time. If your score has moved since the original loan, ask the lender for a rate quote before assuming the spread this calculator shows holds for you.
FAQ
When is it worth it?
If payback is under a year or two and you keep the loan beyond that, usually yes.
Watch the new term
Resetting to a long term can erase savings — compare at the same remaining months.
What about the new payment?
A lower rate usually lowers the payment; the calculator shows both the monthly and lifetime effect.
Does this apply to auto refinancing?
Yes — auto refinance works the same way: same balance, lower rate, fee to recover.
Reviewed by the LoanMath editorial team