How to Calculate Whether Refinancing Will Save Money

Compare the cost of refinancing with the period you expect to retain the loan.

Use the Refinance Break-Even alongside this illustrative example.

A practical example

If an illustrative refinance costs 3,000 and reduces the monthly payment by 100, simple fee break-even is thirty months. Selling after twelve months would not recover those fees through payment savings alone. Extending the repayment term may also lower the payment while increasing total interest.

Check the result

Use the outstanding balance and remaining term, not the original loan amount. Compare total repaid and any early-repayment charge alongside the new payment.

Try a comparison

Increase illustrative refinancing costs from 3,000 to 4,000 while preserving a 100 monthly saving. Simple fee break-even moves from thirty to forty months. This isolates the cost assumption; changing the term at the same time would also affect the repayment comparison.

What this does not establish

A break-even figure is a model, not a recommendation or lender quote. Rate changes, fees and differences in loan terms can alter the comparison.

Further reading

CFPB homebuying resources explain loan comparisons and the steps to obtain and assess official loan offers. Rules outside the United States require local sources.

Report unclear guidance or a result that needs checking.