Refinancing means replacing your existing loan with a new one -- usually at a lower interest rate -- by either transferring the balance to another lender or renegotiating with your current bank.
About this calculator
Refinancing means replacing your existing loan with a new one -- usually at a lower interest rate -- by either transferring the balance to another lender or renegotiating with your current bank. For a typical Indian home loan in years 3-8 of its tenure, even a 0.5% rate drop can save several lakhs in interest. But every refinance carries upfront costs: processing fee (0.5-1% of the loan), legal and valuation charges, MOD stamp duty, and lost time. The right question is not 'is the new rate lower' but 'do I save more than I spend, and how soon do I cross the break-even line'.
This calculator compares two loans side by side. It computes both EMIs precisely with the standard reducing-balance formula, totals the interest you would pay over the full remaining tenure on each, and subtracts the switching cost. The break-even month tells you how long you must keep the new loan to actually pocket the savings -- especially if you might prepay or sell the asset within a few years.
A classic mistake is comparing only the EMI. Lenders happily offer a lower EMI by quietly extending the tenure, which can leave you paying more total interest despite a smaller monthly outflow. Always set the new tenure equal to the remaining tenure on your old loan first, then optionally shorten it -- never extend it just to chase a lower EMI. If you want to see the impact of paying down the principal instead of refinancing, run the [[amortization]] calculator with extra payments. To weigh keeping the loan versus investing the difference, the [[loan-vs-sip]] comparison helps. And if you are early in tenure, the [[mortgage]] and [[emi]] calculators can model alternative restructures.
Common uses
- Deciding whether to transfer a home loan to a new bank for a lower rate
- Evaluating a switch from MCLR or BPLR to repo-linked rate after RBI cuts
- Comparing personal-loan balance transfer offers from credit-card consolidators
- Modeling LAP (loan against property) refinance after rate revision
- Negotiating a rate reduction with the existing lender using break-even maths
Frequently asked questions
Is refinancing worth it for a 0.25% rate cut?
Usually no on a small or near-mature loan, but often yes on a large home loan with 10+ years remaining. The decisive numbers are net saving (after fees) and break-even months -- not just the rate gap. Run both scenarios in this calculator before deciding.
What hidden costs should I add to switching cost?
Include the new lender
Should I refinance to a lower EMI or to a shorter tenure?
Shorter tenure if your cash flow allows it -- you save dramatically more interest. A lower EMI helps short-term cash flow but may extend the loan and reduce the lifetime saving. The right answer depends on what you would do with the freed-up EMI: invest it in equity for long-term growth, or actually spend it.
How is refinancing different from prepayment?
Prepayment uses your savings to reduce the principal of the existing loan, immediately cutting interest. Refinancing replaces the loan with a new one at a different rate. Often a partial prepayment plus a rate-renegotiation request to the same bank beats a full balance transfer, with no switching cost.
Will refinancing affect my credit score?
Each new loan application generates a hard inquiry, which trims your score by a few points temporarily. The closure of the old loan and successful repayment of the new one rebuilds the score within 3-6 months. Avoid applying with multiple lenders simultaneously -- shortlist first, then apply to one.