How to Calculate If Refinancing Is Worth It

Refinancing your home loan can save you thousands of dollars, but only if you do the math correctly. The key is calculating your break-even point—the moment when your monthly savings exceed the upfront costs of refinancing. At Homejourney, we believe every homeowner deserves transparent, trustworthy guidance to make this important financial decision with confidence.

This guide walks you through the exact calculations you need to determine whether refinancing makes financial sense for your situation, with real Singapore examples and practical tools to help you decide.

Understanding Your Current Mortgage Position

Before calculating refinancing savings, you need to know exactly where you stand with your existing loan. Gather these key details from your latest mortgage statement or contact your current bank:

Current loan amount outstanding (not the original loan amount)
Current interest rate (fixed or floating, and the spread if SORA-based)
Remaining loan tenure in years
Current monthly repayment amount
Lock-in period status (when it expires, if applicable)
Property value (for LTV calculation)

For example, if you took a $500,000 mortgage 5 years ago at 3.5% fixed, and you still owe $450,000 with 25 years remaining, that's your starting point. Your bank can provide a redemption statement showing the exact outstanding balance and any early repayment penalties.

Step 1: Calculate Your Current Total Interest Cost

To see if refinancing saves money, you need to know how much interest you'll pay if you keep your current loan. Use this formula:

Total Interest Remaining = (Monthly Repayment × Remaining Months) − Outstanding Loan Amount

Let's work through a real example. Assume you have:

Outstanding loan: $450,000
Current interest rate: 3.5%
Remaining tenure: 25 years (300 months)
Current monthly payment: $2,025

Total interest you'll pay = ($2,025 × 300) − $450,000 = $607,500 − $450,000 = $157,500

This is the baseline you'll compare against refinancing options. The longer your remaining tenure, the more interest you'll pay, which is why refinancing earlier can sometimes make sense even with lower savings per month.

Step 2: Research New Refinancing Rates

Current refinancing rates in Singapore depend on whether you choose floating or fixed rates, and which bank you select. Most banks now offer rates based on SORA (Singapore Overnight Rate Average) plus a spread, though some still offer fixed-rate options.

The chart below shows recent SORA trends to help you understand how rates have moved:

To find the best rates available, use Homejourney's bank rates comparison tool, which shows current refinancing rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, and other major lenders. This saves you hours of visiting multiple branches or websites.

As of January 2026, typical refinancing rates range from 3M SORA + 0.75% to 3M SORA + 1.40%, depending on your loan amount, credit profile, and chosen bank. Larger loans ($500,000+) typically qualify for better spreads. Compare at least 3-4 banks to ensure you're getting competitive pricing.

Step 3: Calculate Total Interest with New Rate

Once you've identified a potential new rate, calculate what you'd pay in total interest under the refinanced loan. Most banks provide a repayment calculator, but here's the formula:

You can use your bank's calculator or Homejourney's mortgage calculator to instantly see the new monthly payment and total interest cost. Let's continue our example with a refinanced rate of 3M SORA + 0.95% (assume current 3M SORA is 3.85%, so total rate = 4.80%):

Refinanced loan amount: $450,000
New interest rate: 4.80%
Remaining tenure: 25 years
New monthly payment: $2,565

Total interest with new rate = ($2,565 × 300) − $450,000 = $769,500 − $450,000 = $319,500

Wait—this is higher than your current rate! This is why comparing rates matters. Let's recalculate with a lower rate of 3.25%:

New monthly payment at 3.25%: $1,870
Total interest = ($1,870 × 300) − $450,000 = $561,000 − $450,000 = $111,000

Now we're seeing potential savings. The difference between your current total interest ($157,500) and the refinanced total interest ($111,000) is $46,500 in gross savings.

Step 4: Account for Refinancing Costs

This is where many homeowners make mistakes. Refinancing isn't free, and you must subtract all costs from your gross savings. Common refinancing costs in Singapore include:

Legal fees: $800–$1,500 (for documentation and transfer)
Valuation fee: $500–$1,000 (property revaluation by new bank)
Early repayment penalty: 0–1.5% of outstanding loan (if still in lock-in period)
Clawback fee: 0–0.5% of outstanding loan (some banks charge this)
Appraisal/survey fee: $200–$400 (occasionally)
Stamp duty: Usually waived for refinancing, but confirm with your bank

In our example, assume you're past the lock-in period and face these costs:

Legal fees: $1,200
Valuation fee: $800
Clawback fee (0.3%): $1,350
Total refinancing costs: $3,350

For detailed guidance on hidden costs, read Homejourney's Hidden Costs in Refinancing Mortgage Guide: Homejourney to ensure you don't miss any expenses.

Step 5: Calculate Your Break-Even Point

Now for the crucial calculation: how many months until your monthly savings cover the refinancing costs?

Break-Even Months = Total Refinancing Costs ÷ Monthly Savings

In our example:

Current monthly payment: $2,025
New monthly payment at 3.25%: $1,870
Monthly savings: $2,025 − $1,870 = $155
Total refinancing costs: $3,350
Break-even point: $3,350 ÷ $155 = 21.6 months (approximately 1 year 10 months)

This means after 22 months, you'll have recovered all refinancing costs through lower monthly payments. Any savings beyond that point is pure benefit to you.

The general rule: if your break-even point is less than 2-3 years, refinancing usually makes financial sense, especially if you plan to stay in your home beyond that timeframe. If it's 5+ years, the benefit becomes marginal and you should reconsider.

Step 6: Calculate Total Net Savings

To see your complete financial benefit, calculate net savings over your remaining loan tenure:

Net Savings = Gross Interest Savings − Total Refinancing Costs

Using our example:

Gross interest savings: $46,500
Refinancing costs: $3,350
Net savings: $46,500 − $3,350 = $43,150

Over 25 years, you save $43,150 by refinancing at 3.25%. Even accounting for the upfront costs, this is a significant benefit. However, remember this assumes rates stay constant—if you choose a floating rate, your savings could increase or decrease based on future rate movements.

Comparing Fixed vs. Floating Rates in Your Calculation

Your refinancing calculation changes depending on whether you choose a fixed or floating rate. Here's how to think about each:

Floating Rate (SORA + Spread): Your calculation assumes current rates continue, but rates fluctuate. If SORA rises, your monthly payment increases. If it falls, you save more. Use current rates for your break-even calculation, but acknowledge the uncertainty.

Fixed Rate: Your payment stays locked for the fixed period (typically 2-3 years), then reverts to floating. This provides certainty for the fixed period but may have a higher initial rate. Your break-even calculation is more predictable.

Many homeowners refinance to a 2-year fixed rate to lock in current rates while maintaining flexibility, then decide whether to refinance again when the fixed period ends. This strategy can be advantageous if you expect rates to rise.

Using Homejourney's Refinancing Calculator

Rather than doing all these calculations manually, Homejourney's refinancing calculator automates the process. Visit our bank rates page and use the refinancing calculator to:

Input your current loan details
Compare rates from multiple banks instantly
See your break-even point automatically calculated
View total savings over your loan tenure
Adjust scenarios (different rates, tenures, loan amounts)

The calculator accounts for typical refinancing costs and shows you exactly how much you'll save. This transparency is core to Homejourney's commitment to user safety and trust—we want you to make informed decisions with complete information.

Key Timing Considerations

Lock-in Period: If you're still in your current bank's lock-in period (typically 1-3 years), refinancing costs include an early repayment penalty. Calculate whether savings justify this penalty. Sometimes it's better to wait until the lock-in expires.

Interest Rate Environment: If rates are trending downward, refinancing sooner captures more savings. If rates are rising, lock in a fixed rate before they climb further. Track real-time SORA rates on Homejourney to time your decision.

Your Remaining Tenure: If you have only 3-5 years left on your mortgage, refinancing may not make sense because you won't benefit from years of lower payments. However, if you have 15+ years remaining, even small rate reductions create significant savings.

Making Your Refinancing Decision

Once you've completed these calculations, here's your decision framework:

Break-even under 2 years + plan to stay 5+ years: Refinance now
Break-even 2-3 years + uncertain about staying: Consider waiting or refinancing to a shorter tenure
Break-even over 4 years: Only refinance if rates are significantly lower or you expect further rate cuts
Still in lock-in period with high penalty: Calculate if savings justify penalty; often better to wait

When you're ready to refinance, Homejourney makes the process simple. Submit one application through our bank rates page, and your details are shared with DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks simultaneously. You'll receive competing offers, giving you leverage to negotiate even better rates. Use Singpass for instant data verification, and our Mortgage Brokers provide personalized guidance throughout the process.