Worked Calculation Example
Suppose you owe $240,000, the old rate is 7% with 300 payments left, and the new rate is 5.8% for 25 years. The calculator compares amortized payments and adds a $4,500 upfront closing cost to the break-even analysis.
How to Use and Compare Scenarios
Compare multiple quotes with equal loan terms, then evaluate both lifetime interest and cash-flow savings. If selling soon, upfront costs may outweigh short-term savings.
Important Assumptions and Limitations
The model does not include cash-out proceeds, escrow changes, points, penalties, tax treatment or the time value of money. Use actual loan disclosures to decide.
Formula and Input Guide
Monthly payment = P × r / [1 − (1+r)^(-n)]. Simple break-even = upfront refinancing costs ÷ positive monthly payment savings.
Use consistent units and check that the interest rate, time horizon and payment frequency match your actual situation. Change one assumption at a time and compare the updated result. For mortgage-related estimates, monthly principal-and-interest calculations assume a fixed rate and regular monthly payments; actual lender documents govern repayment.
Interpreting the Results
The first number is a planning estimate, not a promise or a quote. Use the supporting breakdown to understand which inputs dominate the outcome. Small changes in rates, timelines or spending can affect the projected result. If you are comparing alternatives, document your assumptions and consider best-case and conservative scenarios.
Common Mistakes to Avoid
- Mixing monthly and annual values without converting them.
- Treating a projected rate or price change as guaranteed.
- Forgetting recurring fees, expenses or existing liabilities.
- Using stale amounts or double-counting the same asset or cost.
- Making a major financial decision from one estimate without checking your actual statements or offers.
When This Calculator Is Useful
Use this tool for initial budgeting and scenario planning before researching real-world quotes or reviewing your statements. It can help show the direction of a change, such as paying a larger deposit, adjusting a target date or setting aside more money each month. Save the inputs you used when comparing results.