Refinance Calculator

Refinancing replaces your existing mortgage or loan with a new one, typically at a lower interest rate. The goal is to reduce your monthly payment, shorten your loan term or both. However, refinancing is not free, lenders charge closing costs that typically amount to 2 to 5 percent of the loan balance, which must be recovered through monthly savings before refinancing delivers a net benefit. The core question is always the break-even point: how many months until your accumulated savings exceed what you paid to refinance.

Enter your current outstanding loan balance, your current interest rate, the new rate being offered, the remaining term on your current loan and the total closing costs. The calculator computes your current and new monthly payments, the monthly saving, and divides the closing costs by that saving to find the break-even month. If you plan to keep the loan beyond the break-even point, refinancing is financially beneficial. If you expect to sell or pay off the loan before then, refinancing will cost you money.

When a lender or broker offers you a lower rate, to determine whether the savings genuinely outweigh the closing costs over your expected remaining loan period.
Before renewing a fixed-rate mortgage at the end of a term, to compare staying with your current lender against refinancing to a competitor offering better terms.
When interest rates fall significantly below your current rate, to quantify the lifetime interest saving and the monthly cash flow improvement.
If you want to shorten your loan term, for example from 25 years to 15 years, and need to understand the payment increase versus total interest saving.
When consolidating multiple loans into a single refinanced mortgage, to evaluate whether the combined terms improve your overall financial position.

Break-Even Point: The month at which cumulative monthly savings from the lower rate exactly equal the closing costs paid to refinance. Staying past this point means refinancing has paid off.

Closing Costs: Fees charged by the lender and third parties to process the refinance. These typically include origination fees, appraisal, title insurance and legal fees, and usually total 2 to 5 percent of the loan amount.

Cash-Out Refinance: A refinance where you borrow more than your current balance and receive the difference as cash. Useful for home improvements or debt consolidation but increases your loan balance.

Rate-and-Term Refinance: A standard refinance that changes only the interest rate and/or loan term without increasing the principal balance, the most common type for saving on interest.

The most frequent refinancing mistake is focusing on the monthly saving without accounting for the break-even period. If you plan to sell your home within two years and the break-even is 36 months, refinancing will cost you more than you save. A second common error is rolling closing costs into the loan, while this eliminates the upfront cost, it means you pay interest on those fees for the life of the loan, significantly reducing the net saving. Always compare the total cost of both loans, not just the monthly payment.

After refinancing, use the Mortgage Payoff Calculator to see how directing some of your monthly saving into extra principal payments could further shorten your loan term. The Mortgage Calculator will show the full amortization schedule on your new loan. If you are considering a cash-out refinance, the Loan Calculator can help you evaluate the true cost of the additional borrowing.

Frequently Asked Questions

Refinancing closing costs typically range from 2 to 5 percent of the loan amount, covering origination fees charged by the lender, appraisal fees to confirm the property value, title insurance to protect against ownership disputes, legal or conveyancing fees, and in some cases prepayment penalties on your existing loan. On a €200,000 loan, this means €4,000 to €10,000 in upfront costs. Some lenders offer 'no-closing-cost' refinancing where fees are rolled into the loan balance or covered by a slightly higher rate, this eliminates the upfront payment but increases the break-even period and total interest paid.

Refinancing typically resets your loan term to a new full term, for example, replacing 18 remaining years on a 25-year mortgage with a new 25-year loan. While this lowers your monthly payment, it significantly increases total interest paid because you are extending the period over which interest accrues on the remaining balance. The alternative is to refinance into a shorter term, matching or bettering your remaining years, which saves total interest but may increase the monthly payment. Always calculate total interest cost across the new loan, not just the monthly saving, to make a fully informed refinancing decision.

Refinancing has a temporary negative impact on your credit score because the lender performs a hard inquiry, typically reducing your score by 5 to 10 points. If you shop multiple lenders within a 14 to 45 day window, credit bureaus generally count all mortgage inquiries as a single event, minimising the damage. The longer-term credit impact is neutral to positive: the new loan replaces the old one and your payment history on the new loan continues to build your credit profile. The score reduction is usually temporary and recovers within a few months of consistent on-time payments.

Most lenders will negotiate when presented with a competitive offer from another lender, it costs them less to retain you than to lose you and acquire a new customer. Before approaching your current lender, get at least two formal loan estimates from competitors so you have documented figures to negotiate against. Present the competitor's offer and ask specifically whether they can match the rate and terms. Some lenders offer streamlined refinancing for existing customers with reduced fees and faster processing, always ask whether this option is available before going through a full application elsewhere.

Refinancing is rarely worthwhile in the final years of a mortgage because you have already paid the majority of the interest, early payments are mostly interest, while later payments are mostly principal. A lower rate in the final years saves relatively little in absolute terms and the closing costs may exceed the total interest saving over the remaining term. The exception is if you are rolling other high-interest debt into the refinanced mortgage, though this converts short-term debt into long-term secured debt, which has its own risks. Use the break-even calculation to confirm whether the saving justifies the cost before proceeding.