Money
Refinance Calculator
Whether replacing your loan actually costs less — counting what you pay and what you still owe, not just the monthly figure.
What each choice has cost you, month by month
Payments made plus what you still owe. Comparing two totals over different terms tells you nothing; comparing what you would owe the world if you sold up in any given month tells you everything.
Scale tops out at $546,095
The same rate, over other terms
One rate, four terms. The order of the monthly saving is the exact reverse of the order of the real one.
| New term | Payment | Each month | In the end | Break even |
|---|---|---|---|---|
| 30 years | $1,498.88 | −$301.12 | +$31,845 | never |
| 25 years | $1,610.75 | −$189.25 | −$24,524 | month 32 |
| 20 years | $1,791.08 | −$8.92 | −$77,892 | month 30 |
| 15 years | $2,109.64 | +$309.64 | −$128,015 | month 28 |
A minus in “each month” is money back in your pocket; a plus in “in the end” is money out of it. The two columns disagree on purpose — that disagreement is the whole decision.
The formula
The fourth line is the one that matters. Adding back the balance still owed is what makes two loans of different lengths comparable at all.
Worked example
$250,000 left at 7%, paying $1,800 a month — 286 payments to go. The offer: 6% with $6,500 of fees and points.
- 30 years → $1,498.88/month (−$301.12), costs $31,845 overall, break-even never
- 25 years → $1,610.75/month (−$189.25), saves $24,524 overall, break-even month 32
- 20 years → $1,791.08/month (−$8.92), saves $77,892 overall, break-even month 30
- 15 years → $2,109.64/month (+$309.64), saves $128,015 overall, break-even month 28
Read the first and last lines together. The term that lowers the payment the most is the only one that costs more, and the term that raises the payment saves the most of all. One rate, one borrower, one set of fees — and the ranking by monthly saving is the exact reverse of the ranking by what you actually pay.
Why refinancing calculators say yes so readily
Because most of them measure the wrong thing. The standard break-even divides the fees by the drop in the monthly payment, which answers “when will the saving have repaid the closing costs” — a fair question, but not the one that was asked. It cannot see that the saving was bought by adding years to the debt.
Run this exact scenario through the best-known calculator on the web and it reports a lower payment, a break-even inside three years, and a verdict in green saying refinancing would be less expensive — while its own comparison table, on the same screen, shows the loan running 6 years and 2 months longer and costing tens of thousands more. Both halves come from the same page. Only one of them is the answer.
On our arithmetic the same deal costs $31,845 more, and there is no month at which it stops doing so.
On a car, stretching the loan has a second cost
$22,000 owed at 9% on a two-year-old car worth $20,000. Refinancing to six years cuts the payment from $700 to $375.08 — a genuine $324.92 a month.
But the car keeps losing value on its own schedule. Keeping the current loan, you stop owing more than it is worth at month 6. After refinancing, not until month 28 — 22 extra months during which writing the car off would leave you paying for a vehicle you no longer have.
calculator.net warns about “upside-down” loans in prose on its refinance page and never calculates one; CalcPrism has no refinance page at all. The depreciation rates are the BLS series, applied from the car’s current age rather than from new.
Where this goes wrong
Taking the break-even you were shown at face value
The usual break-even divides the fees by the monthly saving: pay $6,500 to save $300 a month and you are told you are ahead after 22 months. It is arithmetic applied to the wrong question. That $300 was not conjured by the lower rate — most of it came from spreading the same debt over more years, and those years cost interest that the division never sees. A break-even that ignores the term is a stopwatch timing the wrong race. The honest test compares what each path has cost you at every month, principal still owed included, and it sometimes answers that there is no such month.
Questions
- How do I know if refinancing is actually worth it?
- Compare what each path costs you at the month you expect to be done with it — payments made plus the balance still owed, with fees added on the refinancing side. If the refinanced line is below the other at that month, it is worth it. Comparing monthly payments alone will mislead you whenever the new term is longer, which is most of the time.
- Why does a lower monthly payment sometimes cost more?
- Because refinancing restarts the amortisation. A loan you have been paying for years has moved past the part of the schedule where almost every dollar is interest; a fresh loan drops you back at the start of it. On the example above, taking a new 30-year term at 6% lowers the payment by $301.12 a month and costs $31,845 more in total — a lower rate, and a bigger bill.
- What counts as the break-even point?
- On this page, the first month from which refinancing has cost you less than staying put — and goes on costing less until the end. Checking that it stays ahead matters: a refinance can look like it has won for a while and then fall behind again once the stretched term keeps running. If that month never arrives, the page says never rather than quoting a figure that is only true for a season.
- Should I refinance my car loan to lower the payment?
- Check what it does to the point where you stop owing more than the car is worth. On the example here — $22,000 owed on a two-year-old car worth $20,000 — stretching to six years cuts the payment by $324.92 and pushes that moment from month 6 to month 28. The payment is easier and the exposure lasts far longer.
- Where does the car depreciation figure come from?
- From the U.S. Bureau of Labor Statistics, which publishes annual depreciation rates by vehicle age — 23.9% in the first year, then about 11% for two years, then rising again between years three and five. Because a refinanced car is never new, the calculator applies the rate for its current age rather than starting the curve over. They are averages across all makes: a truck holds value better, an electric car worse.
- Do the fees have to be paid upfront?
- Not always — many lenders will roll them into the new balance, which is convenient and more expensive, because you then pay interest on the fees for the whole term. Either way they belong in the comparison. This page adds them to the refinancing side of the ledger so they cannot quietly disappear from the arithmetic.
- What about a cash-out refinance?
- That is a different decision and this page does not model it. Taking cash out raises the balance, so the comparison stops being like-for-like: you are not just replacing a debt, you are borrowing more. Judge the borrowing on its own terms before judging the refinance.