Mortgage Refinance Calculator

The break-even math behind refinancing

Refinancing replaces your current mortgage with a new one, usually to take advantage of a lower rate. But setting up a new loan carries its own costs — legal fees, a fresh valuation, and other lender charges — so a lower rate only pays off if the monthly saving it produces outweighs what you spent to get it. The break-even point is the number of months it takes for that saving to add up to the refinancing costs: refinancing costs ÷ monthly saving = months to break even. Before that point, you're still behind on a net basis; after it, the refinance is putting you ahead every month.

Refinancing tends to make sense when two things line up: the rate drop is large enough to produce a meaningful monthly saving, and you plan to keep the loan — rather than sell the property or clear the balance — well past the break-even point. A small rate drop on a loan you intend to pay off soon can mean the costs never actually recover.

Worked example: KES 5,000,000 remaining balance

Using the calculator's own defaults — a KES 5,000,000 remaining balance, a current rate of 15% with 15 years left, a new rate of 12.5% over a fresh 15-year term, and KES 150,000 in refinancing costs — the current monthly payment is KES 69,979 and the new one is KES 61,626, a monthly saving of KES 8,353. Dividing the KES 150,000 refinancing cost by that saving gives 17.96 months, which the calculator rounds up to a break-even of 18 months — under a year and a half before the refinance is unambiguously ahead.

If the new rate and term don't actually produce a lower monthly payment than the current loan, there is no monthly saving to divide the costs into. Rather than show a break-even figure built on a negative or zero saving, the calculator displays Not within this term — a direct signal that, on the numbers entered, refinancing doesn't pay for itself. This doesn't account for any early-repayment penalty your current lender may charge, or the tax treatment of interest, so confirm the full cost with both lenders before deciding.