How it works
Both payments use M = P × r(1 + r)n / ((1 + r)n − 1): the current payment on your balance over the remaining term, and the new payment on the same balance over the new term.
- Monthly savings = current payment − new payment
- Break-even = closing costs ÷ monthly savings, rounded up to whole months
- Lifetime interest savings = remaining interest on current loan − total interest on new loan
- Net savings = remaining payments on current loan − (all new-loan payments + closing costs)
Closing costs are assumed to be paid in cash, not rolled into the loan. Extending your term can lower the payment yet increase total interest — watch the lifetime figure.
Worked examples
$250,000 at 7% with 25 years left → 5.5% for 30 years, $5,000 closing
Payment drops from $1,766.95 to $1,419.47, saving $347.48/month. Break-even in 15 months. Lifetime interest savings: $19,074.30; net of closing costs: $14,074.30.
$180,000 at 6.5% with 20 years left → 5.25% for 15 years, $4,000 closing
The payment goes from $1,342.03 to $1,446.98 (up $104.95 per month), so there is no monthly break-even, but lifetime interest savings are $61,631.21 (net $57,631.21 after closing costs) because the loan is paid off 5 years sooner.