Refinance Calculator - Is Switching Lenders Worth It

Trading one loan for a cheaper one - the math behind the switch

Refinancing replaces your existing loan with a new one at a lower rate. The catch: closing costs (origination fee, appraisal, title insurance) create an upfront expense that takes months to recoup through lower payments. This calculator compares both loans side by side, subtracts the costs, and tells you exactly when - and whether - the switch pays off.

Current loan

Balance: $300,000

Rate: 8.5%

Remaining: 240 months

Payment: $2,607/mo

Total interest left: $325,682

After refinancing at 6.8%

Balance: $300,000 (unchanged)

Payment: $2,270/mo

Total interest: $244,740

Closing costs: $4,500

Net saving: $76,442

How to use this calculator - step by step

Current balance ($) - the remaining principal on your existing loan. Check your latest statement or banking app.
Current interest rate (%) - your existing annual nominal rate.
Remaining payments (months) - how many months are left on your current schedule.
New interest rate (%) - the rate offered by the new lender.
New loan term (months) - can match or differ from the current term. Shorter saves more interest.
Origination fee (%) - percentage fee charged by the new lender (0-3% typical).
Other closing costs ($) - appraisal, title insurance, attorney, recording fees.
Read the results - side-by-side comparison, net saving, payment difference and break-even month.

How much does a rate drop save over a full term?

Reference: $300,000 balance, 240 months remaining, no closing costs, same term.

From	To	Payment drop	Interest saved
9.0%	7.0%	-$379/mo	$90,893
8.5%	6.8%	-$337/mo	$80,942
7.5%	6.0%	-$286/mo	$68,623
6.5%	5.5%	-$175/mo	$41,913
5.0%	4.0%	-$155/mo	$37,096

A 1.7-percentage-point drop (8.5% to 6.8%) saves $337/month and $80,942 over the full term. Even a 1-point drop (6.5% to 5.5%) saves $41,913. The larger the remaining balance and term, the bigger the payoff.

Practical examples

$250,000 balance, 8% to 6.5%, 180 months, $3,500 closing costs - payment drops from $2,389 to $2,177 (-$212/mo). Interest saved: $38,117. Net after costs: $34,617. Break-even: 17 months.

$400,000 balance, 9% to 7%, 300 months, 1% fee + $4,000 costs - payment drops from $3,357 to $2,826 (-$531/mo). Interest saved: $159,361. Costs: $8,000. Net: $151,361. Break-even: 15 months.

$150,000 balance, 7% to 5.5%, 120 months, no costs - payment drops from $1,741 to $1,628 (-$113/mo). Interest saved: $13,626. No closing costs means net saving equals gross saving and break-even is instant.

$200,000 balance, 6% to 5.5%, 240 months, $5,000 costs - payment drops from $1,433 to $1,376 (-$57/mo). Interest saved: $13,616. Net: $8,616. Break-even: 88 months (7.3 years). A small rate drop with high costs takes years to pay off - this is borderline.

$80,000 personal loan, 12% to 9%, 48 months, $800 fee - payment drops from $2,107 to $1,992 (-$115/mo). Interest saved: $5,515. Net: $4,715. Break-even: 7 months. Refinancing works for personal loans too - not just mortgages.

FAQ - Frequently asked questions

When is refinancing worth it?

The rule of thumb: refinance when you can drop the rate by at least 1-1.5 percentage points and have more than 10 years remaining. But the real answer depends on closing costs. A 0.5-point drop with zero closing costs beats a 2-point drop with $15,000 in fees if you plan to sell the house in 3 years. Use the calculator to check your specific numbers.

What is the break-even point?

The break-even is the number of months it takes for your monthly savings to cover the upfront closing costs. If you save $200/month and closing costs are $4,000, you break even in 20 months. If you plan to stay in the home or keep the loan longer than the break-even period, refinancing is worth it.

Should I keep the same term or extend it?

Keeping the same term (or shortening it) maximizes interest savings. Extending the term lowers the monthly payment further but increases total interest paid. Example: refinancing $300,000 from 8% / 20 years to 6.5% / 20 years saves $68,000. Extending to 30 years at 6.5% lowers the payment more but you end up paying $383,000 in total interest - more than the original loan.

What closing costs should I expect?

Typical US refinance closing costs run 2-5% of the loan amount. Common items: appraisal ($300-600), title search and insurance ($500-1,500), origination fee (0-1.5%), attorney/notary ($500-1,000), recording fees ($50-200). Some lenders offer "no-cost" refinancing by rolling costs into the rate - you pay a slightly higher rate but nothing upfront.

Can I refinance a personal loan or auto loan?

Yes. Personal loans and auto loans can be refinanced the same way as mortgages - take a new loan at a lower rate to pay off the old one. The math is identical. Closing costs are usually lower (or zero) for personal/auto refinancing, which means even smaller rate drops can be profitable.

Does refinancing hurt my credit score?

A refinance triggers a hard inquiry on your credit report, which temporarily drops your score by 5-10 points. The new account also lowers your average account age. Both effects are minor and recover within 6-12 months. The long-term benefit of lower payments and less total interest far outweighs the short-term credit impact.

Related tools

Debt Consolidation Calculator

Combine multiple debts into one payment and compare the total cost - See calculator

Lease Calculator

Calculate monthly lease payments with residual value, down payment and fees - See calculator

Early Repayment Calculator

See how much interest a lump-sum prepayment saves and how many months it cuts - See calculator

Loan Payment Calculator

Compare fixed vs declining payments and total cost for any loan amount and rate - See calculator

APR Calculator

Convert loan fees and insurance into a single annual rate for fair comparison - See calculator