Why did my saving go negative over the life?

Almost certainly because the new term is longer. A lower rate over more years can still cost more in total, which is why the monthly and lifetime figures are shown separately.

What break-even is acceptable?

If you will not still hold the loan by then, the refinance loses money. Comparing the break-even against how long you expect to stay is the whole decision.

Finance & LoansmortgageUnited States only

Refinance Break-even Calculator

Whether refinancing pays, on both the monthly saving and the lifetime interest. Extending the term while lowering the rate can cut the payment and raise the total cost, which is the trap this makes visible.

Also called: refinance savings, should i refinance.

Lifetime saving

$34,083.55

$34,083.55 saved over the life after 6,000 of costs, and $222.69 a month. You break even on the fees after 26.9 months. The terms are comparable, so the rate is doing the work.

Current payment

$2,966.44

New payment

$2,743.75

Monthly saving

$222.69

Months to break even

26.9

Interest on the current loan

$213,959.12

Interest on the new loan

$173,875.57

Worth checking

The terms are comparable, so the rate is doing the work.

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

Compare the two loans over their own terms. The monthly saving and the break-even on fees answer the cash-flow question. The lifetime interest answers a different one, and the two can disagree: refinancing fifteen years remaining into a fresh thirty-year term almost always lowers the payment and raises the total paid. Keeping the new term equal to the remaining term is the comparison that isolates the rate.

break-even months = closing costs / the monthly saving

C: Closing costs (currency)
E: Monthly payment (currency)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a rate cut over the same term

Balance outstanding: $320,000.00
Current rate: 7.5%
Months left on the current loan: 180
New rate: 6.25%
New term: 180 months
Fees and closing costs: $6,000.00

Lifetime saving$34,083.55

PMT(7.5%/12, 180, -320000) = 2966.44 against PMT(6.25%/12, 180, -320000) = 2743.75, a difference of 222.69 a month. Over 180 months that is 40,083.55 less the 6,000 of costs, and the costs are recovered after 6000/222.69 = 26.9 months. Worked separately.

Open this example

a longer term lowers the payment and warns about it

Balance outstanding: $320,000.00
Current rate: 7.5%
Months left on the current loan: 180
New rate: 6.25%
New term: 300 months
Fees and closing costs: $6,000.00

Lifetime saving-$105,323.48

boundary: the trap this calculator exists to surface. Stretching the same balance to 300 months at 6.25% drops the payment to 2110.94, which looks like 855.50 a month saved, while the lifetime figure is 105,323.48 worse. A calculator that reported only the monthly saving would be recommending this.

Open this example

Method and limits

What it assumes

Fixed rates on both loans, and closing costs paid up front rather than rolled in.

What it deliberately does not model

Prepayment penalties on the existing loan are not included and can change the answer entirely.
It assumes you keep the loan long enough to reach break-even.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Why did my saving go negative over the life?: Almost certainly because the new term is longer. A lower rate over more years can still cost more in total, which is why the monthly and lifetime figures are shown separately.
What break-even is acceptable?: If you will not still hold the loan by then, the refinance loses money. Comparing the break-even against how long you expect to stay is the whole decision.