The new loan runs 36 months longer than your current one; lifetime savings include those extra payments.
After 36 payments, refinancing costs $5,021.88 less including the remaining debt. Cash paid is $5,301.49 lower, and the new loan still owes $288,252.21. Payment savings first recover the cash closing costs in month 20.
Cash paid includes closing fees only when paid upfront. Financed fees are already in the new balance. All displayed amounts are rounded after calculation.
Current payment
Mc=PMT(127.25%,324,300,000.00)=2,112.58
New payment
Mn=PMT(126%,360,300,000.00)=1,798.65
Monthly savings
2,112.58−1,798.65=313.93
Cash closing-cost recovery
⌈313.936,000.00⌉=20
Payment savings first recover the cash closing costs in month 20. This measure excludes remaining debt and can reverse after one loan ends.
Lifetime savings
324×2,112.58−(360×1,798.65+6,000.00)=30,962.00
Comparison assumptions
Fixed annual rates divided by 12, payments at each month end, and payoff immediately after the selected payment. Internal payments are unrounded; the final payment clears the remaining balance. Taxes, insurance, prepayment penalties, cash-out proceeds, extra payments and investment returns on cash are excluded.
About the refinance calculator
Refinancing replaces your current loan with a new rate or term. Choose how many monthly payments you expect to make before selling or refinancing again. The main result compares cash paid plus remaining debt at that same month for both loans. A positive result means lower nominal borrowing costs under these assumptions; a negative result means higher costs.
With the defaults, 300,000 at 7.25% with 27 years left refinanced to 6% over 30 years, the payment falls from 2,112.58 to 1,798.65. After 36 payments and 6,000 of cash fees, cash savings are 5,301.49, but the new loan still owes 279.61 more. Savings including remaining debt are therefore 5,021.88.
Cash closing-cost recovery is a separate measure: payment savings recover the default cash fees in month 20. It does not account for different balances at sale. Financed fees raise the new loan amount and are counted once in the debt comparison. Rates are fixed, payments are monthly, and taxes, insurance, cash-out borrowing and the time value of money are excluded.
Compare the refinance at the time you expect to leave it
Enter how many monthly payments you expect to make before selling the property or refinancing again. The calculator compares both loans immediately after that payment. Use 36 months for three years, 60 for five years, or 0 to see the position at closing before any payment. This is a holding-period comparison, so you do not need to assume that you will keep either loan until its last scheduled payment.
Two quantities matter: the cash you have paid and the debt still outstanding. Adding them gives the nominal amount needed to make the payments so far and then clear the remaining principal. Subtract the refinance total from the current-loan total. A positive answer favors refinancing on this cost measure; a negative answer favors keeping the existing loan. It does not measure affordability or a return on invested cash.
The CFPB's loan-comparison guidance makes a similar distinction for five-year borrowing costs: separate principal repaid from the total payments and fees. Here you choose the number of months and can inspect the remaining balances directly.
Worked example: selling after three years
Start with a balance of 300,000, a 7.25% annual rate and 27 years remaining. Compare a new 30-year loan at 6%, with 6,000 of fees paid in cash. These rates are example inputs, not current offers. Set the holding period to 36 months.
At month 36
Keep current loan
Refinance
Monthly principal and interest
2,112.58
1,798.65
Cash paid, including upfront fees
76,052.95
70,751.46
Remaining principal
287,972.60
288,252.21
The smaller payments free 5,301.49 of cash after the fees. The refinance also leaves 279.61 more debt. Subtracting that extra debt gives 5,021.88 of savings including remaining debt. All values use the selected display currency; the underlying comparison is the same.
The cash closing-cost recovery month is 20, because monthly payment savings have then covered the upfront fees. That number answers a different question from the 36-month cost comparison. The calculator retains both measures so you can see the cash position without confusing it with the cost of borrowing. The lifetime figure assumes both loans run to their respective scheduled ends.
A lower payment can leave a larger bill at sale
Consider 100,000 at 3% with ten years left, replaced by a new 30-year loan at the same rate. Pay 3,000 of fees in cash and compare after 36 payments. The monthly payment falls from 965.61 to 421.60: a reduction of 544.00.
After the cash fees, the payment reduction has freed 16,584.12. But the original loan would owe 73,078.45, while the refinance still owes 93,544.16. The additional debt is 20,465.71, making the refinance 3,881.59 more expensive at the selected month. The lower payment comes from repaying principal more slowly, without an interest-rate reduction to compensate.
The reverse is possible too. Refinancing 250,000 from 6.75% with 25 years left to 5.5% for 15 years, financing 5,000 of fees, raises the payment by 356.28. After 36 payments it uses 12,826.22 more cash but leaves 17,946.64 less debt. Nominal savings are 5,120.42. The higher payment still has to fit the household budget; a lower borrowing cost does not create the cash needed each month.
Pay fees in cash or finance them once
When fees are paid upfront, they appear in the refinance cash total at month 0. When financed, they increase the new principal instead. In the default example, financing 6,000 starts the new loan at 306,000. Those fees then affect both the payment and the balance, and they accrue interest while outstanding.
Do not subtract financed fees again from the cash-plus-debt comparison. They are already present in the debt. An equivalent check is to subtract the refinance's interest paid and the closing fees from the current loan's interest paid. Both approaches describe the same nominal borrowing-cost difference for this model, which has no cash-out proceeds.
A zero-interest example makes the accounting visible. Replace a one-year 12,000 loan with a two-year loan and finance a 120 fee. Payments change from 1,000 to 505. After six months, cash savings are 2,970, while the extra debt is 3,090. The refinance costs exactly the 120 fee. Spreading principal repayments over more months does not erase that cost.
Use actual nonrefundable fees after lender credits. A refundable escrow deposit is not a borrowing fee, even though it affects the money needed at closing. The CFPB explains points and lender credits as a tradeoff between upfront charges and the interest rate. Enter the rate and net fees of the same offer together.
What the recovery month and chart tell you
The recovery month is the first month that payment savings cover fees paid in cash. A zero means there were no cash fees to recover; financed fees can still make the refinance more expensive. If cash payments never recover the upfront fees over the modeled schedules, no recovery month is shown.
The solid chart line includes remaining debt, and the dashed line tracks cash savings. Both compare keeping the current loan with refinancing at each month. After one loan ends, its payments stop while the other may continue. A cash recovery reached earlier can therefore reverse later. Inspect the chosen-month result and the full curves instead of treating the first crossing as a promise of permanent savings.
The table records year-end positions, your selected month and the final comparison month. Its cash columns are cumulative. Downloading the table preserves the same balances and cash totals used by the chart.
Inputs, assumptions and a lender's payoff quote
Use the current unpaid principal, not the original amount borrowed or the home's value. Enter the contract interest rate rather than APR: fees are entered separately here. Remaining years may be fractional if they represent whole months, such as 27.5 years for 330 months. The new term is in whole years, and the comparison period accepts whole months from 0 through 600.
The model uses fixed annual rates divided by 12 and payments at each month end. It keeps full internal precision and clears any residual in the final payment; displayed numbers are rounded afterward. Adjustable rates, extra payments, cash-out borrowing, taxes, mortgage insurance, prepayment penalties, sale costs and investment returns on retained cash are excluded. Use the amortization schedule calculator to explore payment frequencies and compounding conventions.
Remaining principal immediately after a scheduled payment is not an official dated payoff quote. Accrued interest or other charges can change what must be paid on the actual closing day. Request the lender's figure for that date; the CFPB explains why a payoff amount can differ from the balance. The comparison helps you inspect the tradeoffs before checking the full terms of an offer.
Worked examples
300k at 7.25% with 27 years left → 6% for 30 years
Current loan balance
300,000
Current interest rate (per year)
7.25%
Years left on current loan
27 years
New interest rate (per year)
6%
New loan term
30 years
Closing costs
6000
Add closing costs to the new loan
no
Months until sale or next refinance
36 months
Current monthly payment
2,112.58
New monthly payment
1,798.65
Monthly payment savings
313.93
Cash closing-cost recovery month
20
Lifetime savings
30,962.00
Savings including remaining debt
5,021.88
Cash saved by that month
5,301.49
Current debt minus new debt
-279.61
Checked against: Python Decimal at 65 digits: annuity payments and closed-form balances after 36 payments; cash savings 5301.49 less 279.61 additional debt = 5021.88
Lower payment but greater cost when selling after three years
Current loan balance
100,000
Current interest rate (per year)
3%
Years left on current loan
10 years
New interest rate (per year)
3%
New loan term
30 years
Closing costs
3000
Add closing costs to the new loan
no
Months until sale or next refinance
36 months
Monthly payment savings
544.00
Cash saved by that month
16,584.12
Current balance at comparison
73,078.45
New balance at comparison
93,544.16
Savings including remaining debt
-3,881.59
Checked against: Python Decimal annuity and closed-form balance comparison: 16584.12 cash savings minus 20465.71 additional debt
Shorter 15-year loan with costs rolled in
Current loan balance
250,000
Current interest rate (per year)
6.75%
Years left on current loan
25 years
New interest rate (per year)
5.5%
New loan term
15 years
Closing costs
5000
Add closing costs to the new loan
yes
Months until sale or next refinance
36 months
New loan amount
255,000.00
New monthly payment
2,083.56
Monthly payment savings
-356.28
Cash closing-cost recovery month
0
Lifetime savings
143,142.34
Savings including remaining debt
5,120.42
Cash saved by that month
-12,826.22
Current debt minus new debt
17,946.64
Checked against: Python Decimal closed-form balances: after 36 payments, 12826.22 extra cash repays 17946.64 more debt, saving 5120.42; no cash closing fees to recover
Same rate and term — only the costs change
Current loan balance
200,000
Current interest rate (per year)
6%
Years left on current loan
30 years
New interest rate (per year)
6%
New loan term
30 years
Closing costs
3000
Add closing costs to the new loan
no
Months until sale or next refinance
36 months
Monthly payment savings
0.00
Lifetime savings
-3,000.00
Current monthly payment
1,199.10
Savings including remaining debt
-3,000.00
Checked against: Identical annuities cancel, leaving −closing costs; 200,000 at 0.5%/month over 360 months = 1,199.10 (Python decimal)
Questions
How do you calculate the break-even point on a refinance?
For cash fees and a lower payment, divide the fees by the monthly payment saving and round up, while both loans are still running. The default cash fees are recovered in month 20. That is a cash-flow measure, not a complete sale-date comparison: the two loans can have different remaining balances. Use the savings including remaining debt at your chosen month to compare the nominal borrowing costs.
How much are refinance closing costs?
Freddie Mac gives a general range of 3% to 6% of the loan principal, but use the fees on your own Loan Estimate. Enter nonrefundable loan costs after lender credits. Do not count a refundable escrow deposit as a fee. Fees financed in the loan still cost money and also accrue interest; select Add closing costs to the new loan to include them that way.
Is it worth refinancing for a 1% lower rate?
The rate reduction alone is not enough to decide. Enter the actual closing costs, remaining term, new term and expected holding period. Compare the resulting cash payments and remaining debt together. A lower payment can come from stretching out repayment, and the resulting larger balance can offset the cash savings when you sell.
Does refinancing into a new 30-year loan cost more?
It can, because it restarts the term. The default refinance to 30 years saves 313.93 a month but adds 36 payments, so lifetime savings are 30,962.00. Refinancing the same 300,000 at 6% over the 27 years left saves 240.63 a month and 71,962.80 in total, because no extra years of interest are added.
Should I roll closing costs into the new loan?
Financing fees avoids that cash payment at closing but raises the debt and the interest charged on it. Adding the default 6,000 raises the new loan to 306,000 and the payment to 1,834.62. The cash closing-cost recovery month is zero because no fees were paid in cash; that does not mean the refinance is cheaper. The main result includes the financed fees through the higher debt and its interest.
Should I refinance if I plan to sell in three years?
Set Months until sale or next refinance to 36. Compare each loan's payments through that month and the principal still owed just after the 36th payment. With the defaults, cash savings are 5,301.49 and the refinance leaves 279.61 more debt, giving 5,021.88 of nominal savings before excluded items such as taxes or an investment return on cash. Your actual sale and payoff figures can differ.
Can a lower monthly payment cost more when I sell?
Yes. Replacing 100,000 at 3% with 10 years left by a new 30-year loan at the same rate, with 3,000 of cash fees, saves 544.00 a month. After 36 payments it frees 16,584.12 of cash but leaves 20,465.71 more debt. Including that debt, it costs 3,881.59 more at that point.
How accurate is the refinance calculator?
Accuracy depends on your inputs and the method's assumptions. Decimal arithmetic uses 50 significant digits, but estimates, numerical methods and source data can be less precise; the displayed rounding does not remove those limits. It is checked against 7 worked examples whose answers come from independent sources; for example, “300k at 7.25% with 27 years left → 6% for 30 years” is checked against Python Decimal at 65 digits: annuity payments and closed-form balances after 36 payments; cash savings 5301.49 less 279.61 additional debt = 5021.88.
Where does the method come from?
Consumer Financial Protection Bureau — Should I refinance? (handout); Consumer Financial Protection Bureau — How should I use lender credits and points? (upfront cost vs monthly savings); Consumer Financial Protection Bureau — Compare loan offers: payments, principal repaid and five-year borrowing cost; Freddie Mac — Understanding the costs of refinancing; Consumer Financial Protection Bureau — Payoff amount versus current balance; Microsoft Excel PMT function.