Calculator Inputs
Example Data Table
| Scenario | Balance | Current Rate | New Rate | New Term | Costs | Est. New Payment |
|---|---|---|---|---|---|---|
| Lower rate, longer term | $65,000 | 9.50% | 7.25% | 15 yrs | $2,500 | $592.78 |
| Moderate fees, same term | $40,000 | 8.75% | 7.90% | 10 yrs | $1,800 | $482.20 |
| Cash-out included | $85,000 | 10.10% | 8.20% | 20 yrs | $3,200 | $718.91 |
Formula Used
- Monthly rate: r = APR ÷ 12 ÷ 100
- Interest-only payment: Payment = Balance × r
- Amortizing payment: Payment = P × r ÷ (1 − (1 + r)−n)
- Horizon interest (amortizing): Sum of monthly interest across horizon months
- Break-even (simple): Months = Upfront Costs ÷ Monthly Payment Savings
- After-tax interest (optional): Interest × (1 − Tax Rate) when deductible
How to Use This Calculator
- Enter your current balance and current annual rate.
- Select whether you pay interest-only or amortizing now.
- Enter the new rate, new term, and expected closing costs.
- Choose whether costs are paid now or financed.
- Set a horizon based on how long you’ll keep the loan.
- Press Calculate to view payment change and break-even.
Professional Guidance
Payment changes you can measure
Refinancing a revolving balance into a new term converts uncertainty into a predictable schedule. For example, a $65,000 balance at 9.50% interest-only costs about $514 per month, while a 15‑year 7.25% amortizing refinance is about $593 per month. Your payment can rise even when the rate falls, because principal repayment is added. Small rate moves matter; a one‑point drop on $50,000 can reduce annual interest by about $500.
Interest over a realistic holding period
Most borrowers keep a refinance for a limited horizon. Over five years, interest-only at 9.50% on $65,000 totals roughly $30,875. A $65,000 amortizing loan at 7.25% for 15 years accrues about $22,400 of interest in the first five years, assuming standard amortization. Comparing horizon interest is often more useful than comparing full-term totals.
Fees and the break-even point
Closing costs behave like an upfront investment. If you pay $2,500 in fees and save $60 per month, the simple break-even is about 42 months. If you finance those costs, cash needed today drops, but the loan amount increases and interest compounds. Use the calculator to compare both fee treatments side by side.
Cash-out and risk management
Cash-out increases leverage. Adding $10,000 to the balance raises the monthly payment and interest exposure, but it can replace higher-cost debt. Track how the new payment fits your budget and keep a buffer for variable-rate scenarios if your option is not fully fixed.
After-tax perspective and decisions
If interest is deductible, the effective cost of borrowing can be lower. At a 22% marginal rate, $10,000 of deductible interest costs about $7,800 after tax. Because deductibility depends on how funds are used and local rules, treat this as a planning lens, not a guarantee, and verify details with a qualified professional.
FAQs
What balance should I enter if my line is variable?
Use the current outstanding principal, not your credit limit. If you expect draws soon, test a higher balance scenario to see how payments and break-even change.
How does interest-only differ from amortizing in the results?
Interest-only uses balance × rate ÷ 12, so the payment covers interest only. Amortizing uses a fixed-payment formula that repays principal over the term, usually raising the payment but reducing total interest.
Why can my payment increase even with a lower rate?
A refinance often converts to a repayment schedule. When principal repayment is added, the monthly amount can rise despite a lower APR, especially with shorter terms or cash-out.
Should I finance closing costs?
Financing reduces cash at closing, but increases the new loan amount and interest paid over time. Compare both options using the same horizon to see which fits your cash flow and total-cost goals.
What does the horizon mean?
The horizon is how long you expect to keep the refinance before selling, paying off, or refinancing again. The calculator compares interest and costs only over that period, which can better match real-life decisions.
Does the after-tax interest estimate apply to everyone?
No. Deductibility depends on local rules and how borrowed funds are used. Treat it as a planning estimate and confirm eligibility with a qualified tax professional.
Notes and Practical Guidance
- HELOC rates are often variable, so future payments can change.
- A lower payment may come from a longer term, not only rate savings.
- Financing fees reduces cash upfront but can increase total interest.
- Deductibility depends on local rules and how funds were used.