Mortgage Refinance Savings Calculator
Compare your current mortgage with a new loan to see how much you could save.
How to Use the Refinance Savings Calculator
Refinancing a mortgage involves replacing your current home loan with a new one, typically to take advantage of lower interest rates or to change the loan term. This calculator helps you determine if the upfront costs of refinancing are justified by the long-term monthly savings.
Understanding the Results
Monthly Savings: This is the immediate cash flow benefit you see every month. However, a lower monthly payment doesn't always mean you are saving money in the long run if you extend your loan term significantly.
Break-Even Point: This is the most critical metric for refinancers. It represents the number of months it takes for your monthly savings to "pay back" the closing costs of the new loan. If you plan to sell the home before reaching the break-even point, refinancing may actually cost you money.
Is Refinancing Right for You?
Consider refinancing if:
- Current market interest rates are at least 0.75% to 1% lower than your current rate.
- Your credit score has improved significantly since you took out your original loan.
- You plan to stay in the home longer than the calculated break-even period.
- You want to switch from an Adjustable-Rate Mortgage (ARM) to a stable Fixed-Rate Mortgage.
Example Calculation
Imagine you have a $300,000 balance on a 30-year mortgage at 6.5%. Your monthly principal and interest payment is approximately $1,896. If you refinance into a new 30-year loan at 5.25%, your new payment would be $1,656.
In this scenario, you save $240 per month. If the closing costs for the refinance are $4,500, your break-even point is 18.7 months ($4,500 divided by $240). If you stay in the house for at least 2 years, the refinance is financially beneficial.