The concept
What a refinancing comparison can show
A lower payment is not automatically a lower total cost. A changed term, financed fees and the remaining current schedule all affect the comparison.
This model holds each entered rate constant and excludes tax effects, penalties and rate changes.
The method
How the calculation works
Both loans use the standard amortization formula. Closing costs are added to the replacement balance, then payment difference and simple break-even time are calculated.
Break-even months divide entered closing costs by positive monthly savings. A longer replacement term can lower payment while increasing total cost.
Worked example
A neutral example
A current $250,000 balance at 7% with 240 months remaining can be compared with a 20-year replacement at 5.5% including $5,000 of financed costs.
This example explains the method. It does not recommend a financial action or predict an outcome.
Frequently asked
Refinancing Calculator questions
What if monthly savings are negative?+
The replacement payment is higher and break-even is not defined.
Does break-even prove refinancing is worthwhile?+
No. It is only one comparison measure.
Are taxes or penalties included?+
No. Entered closing costs are the only added costs in this model.