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.
How to tell if refinancing saves money
Compare both loans at the month you expect to sell or refinance again. For each, add the cash paid by then, closing costs included, to the principal still owed; the smaller total is cheaper. Refinancing 300,000 from 7.25% to 6% with 6,000 of fees saves 5,021.88 if you sell after 36 months.
A lower payment alone does not settle it, because a new loan can repay principal more slowly and leave more debt at the sale.
The CFPB's loan-comparison guidance makes a similar split for five-year costs: total payments and fees on one side, principal repaid on the other.
Compare the refinance at the time you expect to leave it
Suppose you expect to sell after three years. The current loan has 300,000 left at 7.25% with 27 years to run; the new one is a 30-year loan at 6%, with 6,000 of fees paid in cash. These rates are example inputs, not current offers.
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, so the saving including remaining debt is 5,301.49 − 279.61 = 5,021.88.
Break-even, savings at sale and lifetime cost
The usual break-even rule divides the fees by the monthly saving: 6,000 ÷ 313.93 = 19.1, so payment savings repay the cash fees in month 20. That is a cash-flow test only, and it ignores the different balances at the sale.
Cash savings can also reverse. Once the shorter loan is paid off its payments stop while the other loan's continue, so a break-even reached early can turn into a loss later.
Restarting at 30 years has a lifetime cost. The new loan adds 36 payments, so lifetime savings shrink to 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.
A lower payment can cost more when you sell
Take 100,000 at 3% with ten years left, replaced by a new 30-year loan at the same rate with 3,000 of fees in cash. The payment falls from 965.61 to 421.60, about 544 a month.
After 36 payments those savings have freed 16,584.12 of cash, net of the fees. But the old loan would owe 73,078.45 and the new one still owes 93,544.16, 20,465.71 more. Including that debt, the refinance costs 3,881.59 more.
The lower payment comes from repaying principal more slowly, with no rate cut to pay for it.
A higher payment can still save
The reverse also happens. Refinancing 250,000 from 6.75% with 25 years left to 5.5% over 15 years, with 5,000 of fees financed, raises the payment by 356.28.
After 36 payments it has used 12,826.22 more cash but leaves 17,946.64 less debt, a saving of 5,120.42. The higher payment still has to fit the household budget.
Paying closing costs in cash or rolling them in
Fees paid in cash count at closing. Financed fees raise the new principal instead, so the 6,000 makes the new loan 306,000 and the payment 1,834.62, and they accrue interest while outstanding.
In the worked example, rolling the 6,000 in lowers the 36-month saving from 5,021.88 to 3,961.81. The break-even month drops to zero, because no cash fees are left to recover, but that does not make the refinance cheaper.
Count financed fees once, through the higher debt. A zero-interest case shows why: replace a one-year 12,000 loan with a two-year loan and finance a 120 fee. Payments fall from 1,000 to 505.
After six months, cash savings are 2,970 and the extra debt is 3,090, so the refinance costs exactly the 120 fee. Spreading principal over more months does not erase that cost.
Which fees to count
Use the nonrefundable loan fees after lender credits. A refundable escrow deposit affects the cash needed at closing but is not a borrowing cost.
Balance: the current unpaid principal, not the original loan or the home's value.
Rates: the contract interest rate, not the APR, since fees are counted separately.
Terms: years left can be fractional if they make whole months, such as 27.5 for 330 months; the new term is whole years.
Holding period: 0 to 600 months, where 0 is the position at closing, before any payment.
Rates are fixed, payments are monthly, and money paid at different times is added without discounting.
Adjustable rates, extra payments, cash-out borrowing, taxes, mortgage insurance, prepayment penalties, sale costs and returns on cash you keep are left out.
The remaining principal right after a payment is not a dated payoff quote. Accrued interest and other charges change the amount due on closing day, so ask the lender for that figure; the CFPB explains why a payoff amount can differ from the balance.
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: 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: 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: 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
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.
For planning only. Lenders, tax authorities and markets apply their own rounding, fees and rules; confirm figures with them before you commit.
Checked against references
This calculator includes 7 worked examples with independently sourced answers. They run in the test suite, and you can run them here too.
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