Loan Refinance Calculator
Compare your current loan with refinancing options. See monthly savings, interest reduction, net savings after penalties, and break-even point.
Enter your current loan and refinance terms to see the comparison
- Enter your current loan balance, rate, and remaining term
- Enter the new loan rate and term you’re considering
- Enter prepayment penalty to calculate net savings
- Check the break-even point to see when refinancing pays off
This calculator is for reference only. Please consult your financial institution for actual loan terms.
What is a Loan Refinance Calculator?
Loan refinancing means replacing your existing loan with a new one that offers better terms, such as a lower interest rate, different repayment schedule, or alternative loan structure. When mortgage rates drop or your credit score improves, refinancing can significantly reduce your monthly payments and total interest costs over the life of the loan.
The Loan Refinance Calculator helps you compare your current loan against refinancing options by showing the monthly payment difference, total interest savings, net savings after closing costs, and the break-even point — all in one clear view.
Common refinancing scenarios include taking advantage of lower market rates, consolidating multiple loans, switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or accessing home equity. This calculator helps you determine whether refinancing makes financial sense for your specific situation by providing concrete numbers based on your inputs.
When Should You Refinance?
- Interest rates have dropped: If current market rates are significantly lower than your loan rate, refinancing can reduce your interest expenses. A difference of 0.5 percentage points or more typically makes refinancing worth considering.
- Your credit score improved: If your credit score has increased since you took out the original loan, you may qualify for better rates. Regular on-time payments and reduced debt can boost your creditworthiness.
- Switch repayment structures: Convert from interest-only or balloon payments to a fully amortizing loan (fixed payment) for more predictable budgeting and guaranteed principal reduction.
- Debt consolidation: Combine multiple high-interest loans into a single lower-rate mortgage to simplify management and potentially save on interest.
- Prepayment penalty period expired: Many loans waive prepayment penalties after 3-5 years. Refinancing after this period eliminates the main cost barrier.
Key Features
- Side-by-side comparison cards: View your current loan and refinanced loan details (monthly payment, total interest, total payment) in parallel for easy comparison.
- Prepayment penalty calculation: Enter penalties as either a percentage of the balance or a fixed dollar amount to calculate true net savings.
- Break-even point analysis: See exactly how many months it will take for your cumulative savings to exceed the upfront costs, with visual progress bar.
- Real-time automatic calculation: Results update instantly as you adjust inputs, enabling quick “what-if” scenario testing.
- Multiple repayment types: Supports fixed payment (amortizing), equal principal, and interest-only loan structures for both current and new loans.
- Share functionality: Generate a shareable URL that preserves all your inputs for easy consultation with advisors or family members.
How to Use
- Enter current loan details: Input your remaining balance, current interest rate, remaining term, and repayment type.
- Enter refinance terms: Specify the interest rate, loan term, and repayment type for the new loan you’re considering.
- Add prepayment penalty: Enter any closing costs or prepayment penalties as a percentage or fixed amount. Leave blank if none apply.
- Review comparison results: Check the monthly payment difference, total interest savings, and net savings after all costs.
- Check break-even point: Confirm how many months it will take to recoup your upfront costs through monthly savings.
Key Refinancing Considerations
What are Prepayment Penalties?
Prepayment penalties are fees charged when you pay off a loan before its scheduled maturity date. In the U.S., these typically range from 2-6% of the loan amount for mortgages, though many modern mortgages don’t have prepayment penalties. Some lenders use a declining penalty structure (e.g., 3% in year 1, 2% in year 2, 1% in year 3, then none).
- Conventional mortgages: Often no penalty, but check your loan documents
- FHA loans: Typically no prepayment penalty
- VA loans: Federal law prohibits prepayment penalties
- Personal/auto loans: May have penalties, typically 1-2% in first 1-2 years
What is the Break-even Point?
The break-even point is when your cumulative monthly savings equal the upfront costs of refinancing. For example, if closing costs are $2,800 and you save $200/month, your break-even point is 14 months (2,800 ÷ 200). If you plan to keep the loan longer than the break-even period, refinancing is beneficial.
Important Refinancing Cautions
- Total cost comparison: Beyond interest rates, factor in closing costs, appraisal fees, title insurance, origination fees, and recording fees. These can total 2-6% of the loan amount.
- Remaining loan term: If you’ve already paid down a significant portion of your mortgage, refinancing into a new 30-year term may increase total interest despite a lower rate. Consider a shorter term or making extra principal payments.
- Adjustable-rate caution: If refinancing to an ARM, understand rate caps, adjustment frequency, and worst-case rate scenarios. Fixed-rate loans offer more predictability.
- Debt-to-income (DTI) ratio: Lenders typically require DTI below 43% (all monthly debt payments divided by gross income). Refinancing requirements may be stricter than your original loan.
- Loan-to-value (LTV) ratio: Most refinances require at least 20% equity (80% LTV) to avoid PMI. Declining home values can prevent refinancing even with good credit.
- Rate lock timing: Mortgage rates can change daily. Consider locking your rate once approved to protect against increases during closing (typical lock periods: 30-60 days).
Frequently Asked Questions
What is loan refinancing?
Loan refinancing is the process of replacing your existing loan with a new one, typically to secure better terms such as a lower interest rate, different repayment schedule, or access to equity. You take out a new loan that pays off the original loan balance, then repay the new loan according to its terms. Refinancing is most common with mortgages but also applies to auto loans, student loans, and personal loans.
How are prepayment penalties calculated?
Prepayment penalties are typically calculated as penalty rate × remaining principal balance × (remaining term / original term). For example, with a $200,000 balance and a 1.4% penalty rate, the maximum fee would be $2,800. Many lenders use a declining structure where the penalty decreases over time (e.g., 2% in year 1, 1% in year 2, 0% after year 3). Always check your loan documents for specific penalty terms, as many modern mortgages have no penalties.
What does the break-even point mean?
The break-even point is the time it takes for your cumulative monthly savings to equal the upfront costs of refinancing (closing costs, prepayment penalties, etc.). For instance, if total costs are $2,000 and you save $150/month, the break-even point is approximately 14 months. If you plan to keep the loan longer than this period, refinancing will save you money. If you might sell or refinance again before break-even, it may not be worthwhile.
What documents are needed to refinance?
Common refinancing documentation includes proof of income (W-2s, tax returns, pay stubs), employment verification, credit report authorization, current mortgage statement, homeowners insurance, property tax records, and home appraisal. For cash-out refinances or investment properties, lenders may require additional documentation such as rental income records or business financial statements. Requirements vary by lender and loan type, so confirm specific needs with your chosen institution early in the process.
How much of a rate difference makes refinancing worthwhile?
Generally, a rate reduction of 0.5 to 0.75 percentage points makes refinancing worth considering, though this depends on your loan balance, remaining term, and closing costs. Larger loans benefit more from smaller rate reductions. Rather than focusing solely on rate difference, use this calculator to determine actual net savings and break-even period. If the break-even point is shorter than your planned time in the home, refinancing is likely beneficial. Also consider non-rate benefits like switching from ARM to fixed-rate for payment stability.