Refinance Calculator

About the Refinance Calculator

Refinancing is sold on one number: the lower monthly payment. That number is real, and on its own it tells you almost nothing.

Two other things decide whether a refinance is worth doing, and both are routinely left out of the pitch. The first is that closing costs have to be earned back before any saving is a gain. The second, and much larger, is that a refinance restarts the amortisation schedule — and a fresh thirty-year term on a loan you are already eight years into can cost more than the higher rate you left behind.

This calculator reports all three separately and does not collapse them into a verdict, because they frequently disagree. When they do, the disagreement is the answer.

How to Use the Refinance Calculator

Enter your balance outstanding — what you owe today, from your statement — and your current rate.

Then months left on the current mortgage. This is the field the whole comparison hinges on, and the one people guess at. Eight years into a thirty-year loan leaves 264 months.

Add the new rate and the new term. The default is 360 months because that is what lenders offer by default, which is exactly the problem this page is about.

Finally the closing costs and whether you would pay them in cash or roll them into the loan.

The Trap: A Lower Rate That Costs More

Take a real position. £226,000 outstanding at 7%, with 22 years left. You are offered 5.5% — a full point and a half cheaper — on a fresh 30-year term, with £4,500 of costs.

  Now:  226,000 at 7%   over 264 months  =  1,680.14 a month
  New:  226,000 at 5.5% over 360 months  =  1,283.20 a month

£396.94 a month cheaper. The break-even on the fees is 12 months. Everything about that looks like a straightforward yes.

It costs £22,898.32 more.

The rate fell by 1.5 points and the interest went up by £18,398, because the term went up by eight years. You were 22 years from being debt-free and you are now 30 years from it.

Lower monthly and more expensive are not contradictory. They are the normal result of extending a term, and the monthly figure is the one the offer leads with.

How to Take the Rate Cut Without the Extension

Set the new term to the months you have left. Same balance, same new rate, 264 months instead of 360:

The 264-month version gives up half the monthly relief and is about £72,000 better over the life of the debt. The 15-year version costs £166 a month more than doing nothing and saves over £106,000.

That is the whole decision, laid out honestly. It is not "should I refinance" — it is "what term should I refinance into", and lenders will not ask you that question.

Break-Even, and What It Does Not Tell You

Break-even is the months of saving needed to recover the fees:

  4,500 ÷ 396.94 = 11.3  →  12 months

It answers exactly one question: will I be in this house long enough for the fees to be worth paying? If you sell or refinance again inside that window, the fees are simply lost.

It answers nothing about lifetime cost. The 360-month refinance above breaks even in twelve months and still loses £22,898. A calculator that reports only break-even will tell you to do it.

Paying the Costs, or Financing Them

Rolling £4,500 of costs into the loan avoids finding the cash, and it is not free — you then pay 5.5% on those fees for 22 years.

Wait — rolled in is a higher payment? Yes: the balance is larger. The cash saving is £4,500 today, and the cost is £3,268.39 over the term. It is a financing decision like any other, not a way of making the fees disappear.

Step-by-Step Example

£226,000 at 7%, 264 months left, refinancing to 5.5% over 264 months, £4,500 costs paid up front.

  Current payment:
    monthly rate = 7% ÷ 12 = 0.5833%
    226,000 × 0.005833 ÷ (1 − 1.005833⁻²⁶⁴) = 1,680.14

  New payment:
    monthly rate = 5.5% ÷ 12 = 0.4583%
    226,000 × 0.004583 ÷ (1 − 1.004583⁻²⁶⁴) = 1,477.70

  Monthly saving:  1,680.14 − 1,477.70 =   202.44
  Break-even:      4,500 ÷ 202.44      =    23 months

  Interest if you stay:       217,556.38
  Interest if you refinance:  164,112.40
  Less the costs:                −4,500.00
                              ───────────
  Lifetime saving:             48,943.98

Understanding Your Result

The new payment is what you would pay, and the difference from what you pay now.

Break-even is how long the fees take to recover. Relevant only to whether you will stay that long.

Lifetime cost is the honest comparison: everything you would pay each way, including the fees. When this disagrees with the monthly saving, trust this one.

Terms compared puts the two timelines side by side, because the term difference is usually the reason the numbers surprise you.

Worth knowing interprets the combination — which of the three cases you are in.

When Should You Use This Calculator?

Before accepting a refinance offer. Run it at the term the lender proposes, then run it again at the months you have left. The second number is the one to decide on.

When rates fall. A rate cut is only worth acting on if it survives the fees and the term reset.

When deciding between terms. The table above is the real choice, and the shortest affordable term is usually right.

Before a cash-out refinance. Adding to the balance compounds the term-extension effect — model the larger balance here first.

When you might move soon. If you will be gone before break-even, the answer is no regardless of how good the rate looks.

Common Mistakes

Judging a refinance on the monthly payment. It is the number designed to persuade you, and the one most affected by simply lengthening the loan.

Accepting a 30-year term by default. You are not starting a mortgage, you are replacing one partway through. Match the remaining term unless you specifically want the extension.

Treating break-even as the whole answer. It tells you about the fees, not about the debt.

Forgetting early repayment charges on the current mortgage. They are not in these figures and can be substantial on a fixed deal.

Assuming rolled-in costs are free. You pay interest on them for the full term.

Refinancing repeatedly. Each one resets the schedule again. Three refinances over a decade can leave you further from being debt-free than when you started.

Ignoring what you would do with the saving. A lower payment that is spent is a longer mortgage. A lower payment overpaid back into the loan is a genuinely different outcome.

Reading this as advice. Every figure here is an estimate for planning, not a quote or financial advice. Lender fees, valuation outcomes and affordability checks all affect the real offer.