Formula
Closing costs can be added to the balance of the new loan:
Monthly change = current payment − new payment
A positive change means the new payment is lower. This does not say the refinance saves money over the whole term.
Assumptions
- Both loans are fixed rate.
- Financed closing costs are added to the new balance.
Worked example
Refinancing a $200,000 balance from 8% to 6% for 20 years changes the payment by $240.02 a month.
Input definitions
- Closing costs financed
- Costs rolled into the new loan. Use zero if you pay them in cash.
Limitations
This is an estimate, not a loan offer, tax filing, or investment advice. The currency control changes the symbol only.
Questions
Does a lower payment always save money?
No. A longer new term can lower the payment and still increase total interest.
What if the change is negative?
The new payment is higher than the current one.