Mortgage Refinance Calculator
Monthly savings from refinancing your mortgage.
Calculate monthly savings and total interest reduction from refinancing your mortgage to a lower rate, including arrangement fees.
What this tool does
This calculator estimates your new monthly payment and the total amount you could save by refinancing your mortgage at a different interest rate. Enter your current loan balance, your existing rate, the new rate you're being offered, and how many years remain on your mortgage. The tool applies standard amortisation mathematics to compute what your monthly payment would become under the new terms, then shows the difference between your current and new payment amounts carried across the remaining loan period. The result illustrates the financial impact of the rate change alone and assumes no changes to the loan term, additional fees, or other borrowing costs. Use this to compare refinance offers or model how rate movements affect your repayment schedule. The output is for illustration purposes and reflects the simplified scenario you enter.
Quick answer: with the default values, the result is $220.90 (Monthly Saving). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Mortgage refinancing to a lower rate produces immediate monthly savings. 200,000 balance at 6% vs 4% over 20 years: the monthly payment drops about 221 (1,433 vs 1,212). Total interest saved over the remaining term: about 53,000. Potentially useful if rate difference exceeds 0.5-1% and you stay in home long enough to recover any fees.
A worked example
With the defaults: current balance of 200,000, current rate of 6%, new rate of 4%, remaining term of 20. The tool returns 220.90.
What moves the number most
The result responds to Current Balance, Current Rate, New Rate, and Remaining Term.
The formula behind this
Standard amortisation. Monthly payment = P × (r × (1+r)^n) / ((1+r)^n - 1). Saving = old - new.
Why this matters
A mortgage is usually the biggest single financial commitment a person makes. The difference between a well-chosen product and a hasty one can run into tens of thousands over the life of the loan. Modelling the numbers ahead of a decision shows how sensitive the outcome is to the rate and structure chosen.
Where the monthly saving comes from
The saving comes from the rate difference applied to the remaining balance and term, not from the headline rate alone. At the defaults, 200,000 over 20 years at 6% against 4% lowers the monthly payment by about 221. The same two-point gap on a balance halfway through its term produces a much smaller figure, because there is less balance and less time for the difference to apply to.
The costs that decide the break-even
The monthly saving is not the whole comparison. Arrangement fees, valuation and legal costs, and any early repayment charge on the existing loan are paid up front and are not in this figure; dividing them by the monthly saving gives the number of months before the change breaks even. Extending the term at a lower rate can also lower the payment while raising total interest, so a saving on the monthly figure does not by itself mean less is paid overall.
Refinancing your £200,000 mortgage from 6% to 4% over 20 years yields $220.90 in monthly savings.
Inputs
| Old Monthly | $1,432.86 |
|---|---|
| New Monthly | $1,211.96 |
| Total Saving | $53,016.35 |
| Remaining Years | 20 |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator computes monthly savings from refinancing using standard amortisation logic. It calculates the current monthly payment based on your outstanding balance, current interest rate, and remaining loan term using the standard amortisation formula. It then recalculates the monthly payment using the new interest rate and the same outstanding balance and term. The saving is the difference between the old monthly payment and the new monthly payment. The model assumes a fixed interest rate throughout the remaining term, treats the loan as a simple amortisation with no prepayment, and does not account for refinancing costs, fees, changes in term length, or taxes. Results represent the monthly payment difference only and do not forecast actual savings or account for how payment changes may affect long-term financial position.
References
Frequently Asked Questions
How much rate cut justifies refinancing?
What about fees?
Can I refinance multiple times?
Extend term?
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