Loan Refinance
What a lower rate saves each month and in total, and how long the switching fee takes to repay.
Enter your numbers
Example: 200000
Example: 7
Example: 5
Example: 20
Example: 1500
Recent
Formula
How the calculation works
Two figures move in opposite directions and both are reported: the monthly payment falls by 231 on a 200,000 balance moving from 7% to 5%, while the lifetime interest falls by 55,365. A shorter term can reverse the second even as the first improves.
The switching fee is what turns a rate cut into a decision. Dividing the fee by the monthly saving gives the break-even month -- seven here -- and moving again before that point means the fee was never recovered.
Common mistakes
- Choosing the deal with the lowest monthly payment. Extending the term lowers the payment and can raise the total interest, so the cheapest month is often the dearest loan.
- Ignoring the fee. A rate cut that takes longer to repay in savings than you plan to keep the loan is not a saving at all.
When to use it
- Use it when a lender offers a lower rate and you want to know whether the switch is worth the fee, and how long until it is.
- It also settles the term question: run the same balance at 15 and 30 years and the trade between the monthly figure and the total becomes plain.
Worked example
On 200,000 moving from 7% to 5%: 231 less a month, 55,365 saved over the term, and the 1,500 fee repaid in 7 months.
Common questions
What if the term is extended?
The monthly payment falls further, but the lifetime interest can rise. That is why both figures are shown: a smaller payment is not automatically a smaller cost.
What does the break-even month mean?
It is how many months of saving it takes to cover the fee. Move again before then -- selling, refinancing once more -- and the fee is not recovered.
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