Refinance savings come down to two numbers: how much your monthly payment drops, and how long you keep the new loan. Everything else is a variation on that theme.
Monthly savings
Current monthly P&I − New monthly P&I = Monthly savings.
Only compare principal + interest — taxes and insurance don't change when you refinance.
Example: Current loan of $400,000 at 7.5% → $2,797/month P&I. Refinance to $400,000 at 6.5% → $2,528/month P&I. Monthly savings of $269.
Total savings over time
Monthly savings × months remaining in the loan = gross total savings. Subtract closing costs for net total savings.
Same example: $269 × 60 months (5-year hold) = $16,140 gross. Minus $6,000 closing costs = $10,140 net savings.
Watch the term-reset trap
If you reset your 30-year loan back to 30 years to hit that lower monthly, you'll pay more total interest over the life of the loan — even at the lower rate. Two fixes:
- Refinance into a shorter term (say 25-year or 20-year) to capture the rate drop without extending the amortization
- Apply the monthly savings as extra principal on the new loan, which mimics the old amortization schedule at the new lower rate
Try the calculator
Plug your numbers into the refinance break-even calculator to see monthly savings, break-even months, and net savings for your specific file.
FAQs
How do I calculate refinance savings?
Subtract your new monthly principal + interest from your current monthly principal + interest. That's the monthly savings. Multiply by the number of months you plan to stay to get total savings — then subtract closing costs for the net benefit.
Should I include taxes and insurance in the savings calc?
No — they don't change when you refinance (unless the appraised value moves your escrow). Only compare principal + interest side-by-side.
What about the total interest saved over the life of the loan?
Interesting but often misleading. If you reset a 30-year loan back to 30 years, total interest may go up even if the monthly payment drops. To capture real long-term savings, either shorten the term or apply the monthly savings as extra principal.
Where does the calculator get rate data?
Our refinance calculator uses your inputs. For a real rate quote based on your credit, LTV, and program, use the rate quote form — no hard credit pull required for the initial quote.
Related: Refinance calculator · When to refinance · Refinance hub