A lower payment means less money is due each month for the items being compared. It does not automatically mean the loan costs less overall.
Check what the number includes
If your statement shows a $2,500 total payment, some of that may cover property taxes, homeowners insurance or mortgage insurance. Comparing that total with a new principal-and-interest payment would mix different things.
Start by comparing principal and interest on both loans. Then separately account for mortgage insurance and other housing expenses. Our calculator can include the mortgage-insurance amounts and durations you enter, but it does not predict cancellation or calculate taxes, homeowners insurance or HOA dues.
A smaller payment can last longer
Imagine one loan has 15 years left and costs $2,000 per month in principal and interest. That is $360,000 across 180 payments. A replacement loan with a $1,500 payment for 30 years totals $540,000 across 360 payments.
In this made-up illustration, the new payment is $500 lower, but its scheduled payments total $180,000 more before any separately paid refinance fees. This is a payment-arithmetic example, not a quoted loan or a prediction about your result.
Fees also matter
A refinance can involve cash-paid fees, fees added to the new loan, or both. Adding fees to the balance avoids paying those fees immediately, but you still repay them and may pay interest on them. Count each fee once.
A lower payment may be useful for a household budget even when the overall cost is higher. The calculator should make that tradeoff visible rather than call every payment decrease a win.
Ask three different questions
- Monthly: How much does the required payment change?
- At my planned move or refinance date: How much will I have paid, and how much will I still owe?
- Until payoff: What do the remaining scheduled payments and entered fees total?
A monthly difference multiplied by 12 is an annualized payment difference while both payment amounts apply. It is not a promise of that amount every year until payoff. When one loan ends earlier, the comparison changes.
Use the result as a comparison
Try a new term close to your remaining term as well as a longer one. Keep the balance, fees and holding period consistent. The CFPB Loan Estimate explainer can help you locate a lender’s written payment and cost information.
See your monthly and overall comparison. Results depend on your assumptions and exclude items described in the methodology. They are not lender offers or a refinance recommendation.