Prepayment vs Refinance Calculator
Pay extra or refinance to a lower rate? A fair race at the same monthly payment, closing costs and break-even included.
Your loan
Option A · Pay extra
Option B · Refinance
Refinance costs & term$5,000 closing, 25 yrs
Often 2–5% of the loan.
New term
Same as your years left keeps the comparison fair; a longer term lowers the payment but adds interest.
Pay extra or refinance?
RefinanceBetter choice
Saves $42,882 more than paying extra, at the same $2,526/mo.
- Paying extra, vs today
- Saves $125,588
- Refinancing, same payment
- Saves $168,471
- Refinance break-even
- 1 year 8 months
An estimate from the numbers you enter; real loan terms, fees and taxes vary. Not financial advice. Terms
Compare the optionsPayment, interest and total cost side by side
Today’s loan
- Monthly
- $2,026
- Total interest
- $307,686
- Closing costs
- $0
- Total cost
- $607,686
- Paid off in
- 25 years
- vs today’s loan
- —
Pay extra
- Monthly
- $2,526
- Total interest
- $182,098
- Closing costs
- $0
- Total cost
- $482,098
- Paid off in
- 15 years 11 months
- vs today’s loan
- Saves $125,588
Refi, same payment
- Monthly
- $2,526
- Total interest
- $134,215
- Closing costs
- $5,000
- Total cost
- $439,215
- Paid off in
- 14 years 4 months
- vs today’s loan
- Saves $168,471
Refi, lower payment
- Monthly
- $1,842
- Total interest
- $252,679
- Closing costs
- $5,000
- Total cost
- $557,679
- Paid off in
- 25 years
- vs today’s loan
- Saves $50,008
How we compare themSame monthly payment, total cost, honest break-even
The verdict compares paying extra on your current loan with refinancing and keeping the same monthly payment, so both options cost you the same each month. Comparing against a refinance that lowers the payment would mix a cheaper loan with simply paying less.
Break-even is the month from which the refinance’s closing costs plus interest paid so far stay below what prepaying would have cost by then, not closing costs ÷ monthly savings, which flatters refinances that stretch the term.
Estimates only. Actual closing costs, rates and terms vary; confirm with your lender.
How this works: Method,
How this works
Method
Both options are paid down month by month with standard fixed-rate amortization: your current loan plus the extra payment, and a new loan at the new rate with its closing costs added, paying the same monthly amount so the race is fair. The lower total of principal, interest and closing costs wins; break-even is the month from which the refinance’s closing costs plus interest so far stay below what prepaying would have cost by then.
Limits
An estimate from the numbers you enter; real loan terms, fees and taxes vary. Not financial advice.
Privacy
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Changes
- Added a printable report.
- Redesigned as a fair race: the refinance is compared at the same monthly payment, break-even now counts closing costs plus interest paid so far, and a chart shows each option’s cost over time.
- Results now update as you type, with no Calculate button.
- First published.
Frequently Asked Questions
What is the difference between prepayment and refinancing?
Prepayment means making extra payments on your existing loan to pay it off faster and reduce total interest. Refinancing means replacing your current loan with a new one, typically at a lower interest rate. Prepayment has no upfront costs, while refinancing involves closing costs but can lower your monthly payment.
When does it make sense to refinance instead of prepay?
Refinancing typically makes sense when the new interest rate is significantly lower than your current rate (usually at least 0.5-1% lower), you plan to stay in the home long enough to recoup closing costs, and your credit score qualifies you for favorable terms. If the rate difference is small, prepayment may be the better option.
What is the break-even point for refinancing?
The break-even point is the number of months it takes for the monthly savings from refinancing to cover the closing costs. Calculate it by dividing total closing costs by the monthly payment savings. If you plan to keep the loan longer than the break-even period, refinancing is generally worthwhile. That shortcut flatters refinances that stretch the term, so this calculator uses a stricter test: the month from which closing costs plus interest paid on the new loan stay below the interest you'd pay prepaying your current loan with the same monthly payment.
What closing costs should I expect when refinancing?
Refinancing closing costs typically range from 2% to 5% of the loan amount. These may include application fees, appraisal fees, title insurance, origination fees, and attorney fees. Some lenders offer no-closing-cost refinances, but these usually come with a slightly higher interest rate.
Can I combine prepayment with refinancing?
Yes, you can refinance to a lower rate and then make extra payments on the new loan. This combined approach can maximize your interest savings and help you pay off the mortgage even faster. Just make sure the new loan does not have prepayment penalties. The "Refinance, same payment" column shows exactly this: refinancing and continuing to pay your current payment plus the extra.