Refinance Calculator

Refinancing means taking a new loan to pay off the one you have, usually to get a lower rate, a different term or some cash out. It is worth it when the interest you save is more than the fees, and you keep the new loan long enough to get there.

The formula

monthly payment = loan × monthly rate × (1 + monthly rate)^months ÷ ((1 + monthly rate)^months − 1)
monthly rate = yearly rate ÷ 12 ÷ 100
monthly saving = current payment − new payment
simple break-even = total fees ÷ monthly saving
true break-even = first month where interest saved so far ≥ total fees
lifetime saving = current payments left − (new payments + fees paid upfront − cash out)

Worked example

You owe 250,000 at 7% a year with 25 years (300 months) left. The monthly rate is 7 ÷ 12 ÷ 100 = 0.005833 and (1.005833)³⁰⁰ = 5.7254, so the current payment is 250,000 × 0.005833 × 5.7254 ÷ 4.7254 = 1,767 a month.

A new loan at 5.5% over 25 years has a monthly rate of 0.004583 and (1.004583)³⁰⁰ = 3.9427, so the payment is 250,000 × 0.004583 × 3.9427 ÷ 2.9427 = 1,535. That is 232 a month less.

With 3,000 of fees, the simple break-even is 3,000 ÷ 232 ≈ 13 months. The true break-even, when the interest saved first covers the fees, is month 10: the cheaper loan also pays down its balance faster.

Over the rest of the loan you would pay 300 × 1,767 = 530,084 on the current loan (280,084 of interest), against 300 × 1,535 + 3,000 = 463,566 on the new one (210,566 of interest). Refinancing saves 66,519.

Longer terms can cost more

Moving the same balance to 6.5% over 30 years lowers the payment to 1,580, a saving of 187 a month, but adds five years of payments. Over the whole loan it costs 41,777 more than staying put. If you sell within about 5 years it still comes out ahead, which is why the "How long you'll keep the loan" box matters.

Keep paying the old payment

If you refinance to 5.5% but keep paying 1,767 a month, the loan is cleared in 229 months instead of 300, 71 months sooner, and the lifetime saving grows to 123,106.

Fees upfront or added to the loan

Adding the 3,000 of fees to the loan means you borrow 253,000. The payment becomes 1,554, break-even moves to month 11 and the lifetime saving falls to 63,992, because the fees collect interest too. Points and percentage fees added to the loan are charged on the bigger loan, so the loan is worked out as (balance + cash out + fixed fees) ÷ (1 − percentage fees).

Cash out

Cash out adds to the new loan and is paid to you. The calculator counts that cash as money in your pocket, so the lifetime figure shows only what borrowing it costs: the interest on it.

Country notes (general, check your own lender)

• India: moving a home loan to another lender is called a balance transfer. Compare the new EMI and total interest after the new lender's processing fee (plus GST) and any legal or valuation charges. RBI rules limit prepayment and foreclosure charges on many floating-rate loans to individuals; check your loan agreement and the RBI's current rules for your loan.
• UK: switching mortgages is called remortgaging. If you are still in a fixed or tracker deal, your lender may charge an early repayment charge (ERC), set out in your mortgage offer; enter it under "Early repayment or exit charge". Product or arrangement fees can often be added to the loan.
• US: refinances usually come with closing costs (appraisal, title, origination and so on) and optional discount points, where one point costs 1% of the loan and buys a lower rate. Enter closing costs as fees and points separately.

Assumes fixed rates, monthly payments and interest worked out monthly for both loans. Payments are principal and interest only (no tax, insurance or escrow). Your lender's figures may differ slightly because of rounding and payment dates. Checked on 10 October 2026.