Refinance Calculator

How this compares

It prices your current payment on the balance and years left, prices the new payment at the new rate and term, and divides your refinance costs by the monthly saving to find the break-even month.

Worked example: $250,000, 7% → 5% can save a few hundred a month; against $4,000 of costs that often breaks even in well under two years. Keep the loan past that point and the rest is pure saving.

The break-even is the whole decision

Refinancing swaps a certain upfront cost for an uncertain stream of savings. The break-even point — total costs divided by monthly saving — tells you how long you must keep the new loan for the trade to pay. If refinancing costs R30,000 and saves R1,200 a month, you break even in 25 months, and refinancing then moving in year one loses money regardless of how good the new rate looked.

The honest question is therefore not "is the new rate lower" but "will I still hold this loan past the break-even". For anyone likely to move, sell or settle early, that answer is often no.

Resetting the term hides the cost

The most common way a refinance looks better than it is: replacing a bond with eighteen years remaining with a fresh twenty-year bond. The payment falls, partly from the better rate and largely from spreading the balance over two extra years. Total interest can rise even at a lower rate, because you are paying for longer and restarting at the interest-heavy front of a new amortization schedule.

The clean comparison keeps the term the same. If the new loan runs longer, compare total interest rather than the instalment, and consider paying the old instalment on the new loan — which captures the rate saving as a shorter term instead of a smaller payment.

Count every cost

Costs vary by country and are easy to underestimate: bond registration and attorney fees, valuation, initiation, cancellation of the existing bond, and sometimes an early-settlement charge on a fixed rate. Where costs can be rolled into the new loan, note that you then pay interest on them for the whole term, which pushes the true break-even out beyond the simple calculation.

Cash-out refinancing deserves separate thought

Borrowing more than you owe to release equity converts short-term needs into long-term secured debt. Using it to consolidate expensive unsecured debt can be sensible arithmetic — and it turns debt that could be written off into debt secured against your home, which is a materially different risk. Using it to fund consumption means paying for a holiday over twenty years. The rate looks cheap precisely because the security is your house.