Refinance Calculator
Compare your current loan with a refinanced loan. Calculate monthly payment savings, total interest savings, and break-even period after closing costs.
CURRENT LOAN
NEW LOAN
β Refinancing saves $139,298
CURRENT EMI
$4,825
NEW EMI
$4,182
Monthly savings: $643 | Break-even: 24 months
π How Refinance is Calculated
Current loan payment
$300,000 at 7.5%, 25 yrs left= $2,218/month
New loan payment
$300,000 at 6.0%, 25 years= $1,933/month
Monthly savings
$2,218 β $1,933= $285/month saved
Break-even point
$6,000 costs Γ· $285/month= 21 months to break even
Rate Comparison
Rate-and-Term
Most Common
Lower rate and/or shorter term | Same loan balance
Cash-Out
Access Equity
Higher loan amount | Receive cash difference
Streamline (FHA/VA)
Easiest Process
Minimal paperwork | No appraisal required
The Hidden Cost of Extending Your Term
π‘ What Is Loan Refinancing?
What Is Loan Refinancing?
Refinancing involves taking out a new loan to replace an existing one, typically to secure better terms. The new loan pays off the old balance in full, and the borrower begins making payments on the new loan. While most commonly associated with mortgages, refinancing applies to car loans, student loans, personal loans, and even credit card debt (via balance transfers).
6 Reasons to Refinance
- Lower interest rate β The most common reason. If rates have dropped or your credit score improved, a lower rate means less interest over the life of the loan and lower monthly payments
- Cash-out equity β Borrow against accumulated home equity for renovations, debt consolidation, or emergencies. Requires maintaining at least 20% equity after the new loan
- Lower monthly payment β Extending the loan term reduces monthly payments, providing breathing room β though you'll pay more total interest
- Shorten the loan term β Refinancing from a 30-year to 15-year mortgage typically comes with a lower rate AND faster payoff, though monthly payments increase
- Consolidate debts β Combine multiple loans into one payment, ideally at a lower overall rate. Simplifies finances and may reduce total monthly obligations
- Switch rate type β Convert from adjustable-rate (ARM) to fixed-rate to lock in certainty, or from fixed to ARM if you plan to sell before the adjustment period
Types of Refinancing
| Type | How It Works | Best For |
|---|---|---|
| Rate-and-Term | Change rate and/or loan length, same balance | Lowering rate or shortening term |
| Cash-Out | New loan is larger than old balance; receive difference | Home improvements, debt consolidation |
| Cash-In | Pay additional cash at closing to reduce new balance | Removing PMI, qualifying for better rate |
| Streamline (FHA/VA) | Simplified process with reduced documentation | Existing FHA or VA loan holders |
| No-Closing-Cost | Closing costs rolled into loan or offset by higher rate | Short-term ownership plans |
Refinancing Student Loans
Federal student loans carry unique benefits: income-driven repayment plans, Public Service Loan Forgiveness (PSLF), deferment/forbearance options, and death/disability discharge. Refinancing federal loans into private loans permanently surrenders these protections. Only refinance federal loans if you have stable income, don't qualify for forgiveness, and can secure a meaningfully lower rate.
Private student loans lack these protections, making them better candidates for refinancing. Grad PLUS and Parent PLUS loans typically have the highest rates and benefit most from refinancing.
Refinancing Car Loans
Auto loan refinancing can lower your rate if your credit has improved or rates have dropped. Key considerations:
- Check for prepayment penalties on your current loan
- Avoid "upside-down" loans β where you owe more than the car is worth
- Extending the term lowers payments but increases total cost
- Typical costs: $50-$300 (admin fees, lien transfer, state re-registration)
Refinancing Credit Card Debt
Credit card refinancing typically involves a balance transfer to a new card with 0% intro APR (usually 12-21 months). Transfer fees of 3-5% apply, but at 0% interest, even with the fee, this saves significantly versus paying 20%+ APR. After the intro period ends, the standard rate applies to remaining balances.
When NOT to Refinance
- You're close to paying off the current loan (little interest left to save)
- Closing costs exceed total interest savings
- You plan to sell or move before the break-even point
- Your credit score has declined (you'll get worse terms)
- You'd lose valuable benefits (federal student loan protections)