Estimate your potential monthly savings and new loan terms by refinancing your current mortgage.
Estimated Refinance Summary
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Understanding House Refinancing
Refinancing your mortgage is the process of replacing your existing home loan with a new one. Homeowners typically refinance to:
Secure a lower interest rate, reducing your monthly payments and total interest paid over the life of the loan.
Change the loan term (e.g., shorten it to pay off the house faster or lengthen it to lower monthly payments).
Tap into home equity by taking cash out for renovations, debt consolidation, or other major expenses.
Switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability, or vice-versa.
How the Refinance Calculator Works
This calculator helps you estimate the financial impact of refinancing. It compares your current mortgage with a proposed new one to show potential savings and costs.
Key Calculations:
The calculator uses standard mortgage payment formulas and then compares the two scenarios.
Monthly Mortgage Payment (P&I): The formula for calculating the principal and interest (P&I) portion of a monthly mortgage payment is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment
P = The principal loan amount (your current loan balance or the new loan amount)
i = Your monthly interest rate (annual rate divided by 12)
n = The total number of payments over the loan's lifetime (loan term in years multiplied by 12)
Total Interest Paid: Calculated by multiplying the monthly payment (M) by the total number of payments (n) and then subtracting the principal loan amount (P).
Total Interest = (M * n) - P
Monthly Savings: The difference between the current monthly payment and the new monthly payment.
Monthly Savings = Current Monthly Payment - New Monthly Payment
Total Interest Savings: The difference between the total interest paid on the current loan and the total interest paid on the new loan.
Total Interest Savings = Total Current Interest - Total New Interest
Break-Even Period: The time it takes for your monthly savings to offset the closing costs of the refinance.
Break-Even Period (Months) = Closing Costs / Monthly Savings
When Does Refinancing Make Sense?
Refinancing is generally beneficial when:
Current interest rates are significantly lower than your existing rate. A common rule of thumb is that a 1-2% drop in interest rate can make refinancing worthwhile.
You plan to stay in your home long enough to recoup the closing costs through monthly savings.
Your financial situation has improved, allowing you to qualify for better terms.
You want to change your loan term to better suit your financial goals.
Remember to factor in closing costs. While a lower monthly payment is attractive, if the closing costs are too high relative to the savings, it might take many years to break even, potentially longer than you plan to stay in the home.
function calculateMonthlyPayment(principal, annualRate, termInYears) {
if (principal <= 0 || annualRate < 0 || termInYears 0 && closingCosts > 0) {
var breakEvenMonths = Math.ceil(closingCosts / monthlySavings);
var breakEvenYears = Math.floor(breakEvenMonths / 12);
var remainingMonths = breakEvenMonths % 12;
var breakEvenString = "";
if (breakEvenYears > 0) {
breakEvenString += breakEvenYears + " year" + (breakEvenYears > 1 ? "s" : "");
}
if (remainingMonths > 0) {
if (breakEvenYears > 0) breakEvenString += " ";
breakEvenString += remainingMonths + " month" + (remainingMonths > 1 ? "s" : "");
}
breakEvenPeriod = breakEvenString || "Less than a month";
} else if (monthlySavings <= 0) {
breakEvenPeriod = "No savings, break-even not possible.";
}
var resultElement = document.getElementById("result");
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(currentLoanTerm) || isNaN(newInterestRate) || isNaN(newLoanTerm) || isNaN(closingCosts)) {
resultElement.innerHTML = "