Look past the rate
What to enter
Put in what you still owe, your rate and how many years are left. Then the new rate, the new term and the fees. If you have your statement handy, enter the loan-and-interest payment from it. That is better than letting the tool work it out, because your real loan may not be running exactly to plan.
The fees and the years decide it
A lower rate does cut what you pay each month in loan and interest. But the lender fees, the title work and the appraisal have to be paid back out of that saving first. And swapping a loan with 20 years left for a fresh 30-year one lowers the payment while keeping you in debt a decade longer.
A worked example
Say the refinance costs you $6,000 up front and saves $250 a month. It takes 24 months to get that $6,000 back. Move house or refinance again before then and you never do.
Which number to look at
- The monthly saving, if you need room in your budget now.
- The payback time, against how long you plan to stay.
- The lifetime cost, to catch a saving that only exists because the loan got longer.
- Real offers from more than one lender, before you decide anything.