Mortgage Refinance Savings Calculator
Calculate your potential monthly savings and determine your breakeven point.
Should You Refinance Your Mortgage?
Refinancing a mortgage involves replacing your existing home loan with a new one, typically to secure a lower interest rate, change the loan term, or tap into home equity. The primary goal for most homeowners is to reduce their monthly financial burden and save on total interest costs over the life of the loan.
How to Use This Refinance Calculator
To get an accurate picture of your potential savings, you will need a few pieces of information:
- Remaining Loan Balance: This is the current principal amount you still owe on your mortgage.
- Current Monthly Payment: Enter only the Principal and Interest (P&I) portion. Do not include taxes or insurance (escrow).
- New Interest Rate: The annual percentage rate offered by your new lender.
- New Loan Term: Usually 15, 20, or 30 years.
- Closing Costs: These typically range from 2% to 5% of the loan amount and include appraisal fees, title insurance, and origination fees.
Understanding the Breakeven Point
The breakeven point is the most critical metric in a refinance analysis. It represents the number of months it will take for your monthly savings to offset the upfront closing costs. For example, if you spend $5,000 on closing costs to save $200 per month, your breakeven point is 25 months. If you plan to sell your home before reaching this point, refinancing may actually cost you money.
Example Calculation
Imagine you have a $300,000 balance at a 7.5% interest rate, and you are offered a 6.0% rate with $4,500 in closing costs. Your current P&I payment is roughly $2,097. At the new rate on a 30-year term, your new payment drops to $1,798. This results in a monthly savings of $299. Your breakeven point would be approximately 15 months.