Refinance Calculator: How to Know If Refinancing Actually Saves You Money
A refinance calculator's core job is answering one question clearly: given the closing costs involved, how long does it actually take for a refinance to pay for itself through lower monthly payments — and does that timeline fit how long you plan to keep the loan? The inputs a refinance calculator needs Current loan balance and current interest rate New interest rate being considered Estimated closing costs for the refinance (commonly 2-5% of the loan amount) How many years you expect to stay in the home or keep this loan The core calculation: break-even point The fundamental formula is straightforward: closing costs ÷ monthly payment savings = months to break even. If a refinance costs $6,000 in closing costs and lowers the monthly payment by $200, the break-even point is 30 months — meaning the refinance only nets a real savings if the loan is kept for longer than that. Why the new rate alone isn't the full picture A lower rate always sounds appealing, but a...