Is refinancing actually worth it?
Refinancing replaces an existing loan with a new one for the same balance, usually to get a lower interest rate, a lower payment, or a different term. The advertised rate is only half the story: every refinance carries fees, and those fees have to be earned back out of the monthly saving before you are genuinely ahead. This calculator compares the two loans on both measures at once โ what changes each month, and what changes over the life of the debt.
The method
Both loans are amortized from the same outstanding balance. The current loan is priced over its remaining term at your current rate; the new loan over its new term at the new rate, with closing costs added to its total. The monthly saving is the difference between the two payments, the break-even point is closing costs divided by that saving, and the lifetime saving is what you would have paid on the old loan minus everything the new one costs, fees included. A negative lifetime saving means the refinance costs more in total even if each payment is smaller.
Comparing offers fairly
Set the new term equal to your remaining term first. That isolates the effect of the rate, so you can see the pure saving without the distortion of a longer schedule. Then try the term you are actually being offered. Watch for fees quoted as a percentage of the balance rather than a flat amount, and check whether your existing loan has an early-repayment charge โ that penalty belongs in the closing-costs box. If you plan to move, sell, or repay early within the break-even window, keeping the loan you have is usually the cheaper choice.