FHA Refinance Calculator
Estimated Monthly Savings
$0.00
New Estimated Monthly Payment (Principal, Interest, Taxes & Insurance)
$0.00
Total Interest Paid Over New Loan Term
$0.00
Total MIP Paid Over New Loan Term
$0.00
Understanding FHA Refinance Calculations
Refinancing an FHA loan can be a strategic move to potentially lower your monthly payments, reduce your interest rate, or access equity. An FHA refinance, often referred to as an FHA Streamline Refinance (if it requires no credit check or appraisal) or a Full FHA Refinance (which includes credit and appraisal), allows homeowners to replace their existing FHA loan with a new one. This calculator helps you estimate the potential financial benefits of such a refinance.
The primary goal of refinancing is often to secure a lower interest rate, which directly impacts your monthly principal and interest (P&I) payment. However, FHA loans also involve Upfront Mortgage Insurance Premium (UFMIP) and Annual Mortgage Insurance Premium (MIP). When you refinance an FHA loan, these premiums are recalculated for the new loan. Closing costs are also a critical factor, as they can offset immediate savings.
How the Calculator Works:
This calculator estimates your new monthly payment and potential savings by considering:
- Current Loan Balance: The outstanding principal of your existing FHA loan.
- New Interest Rate: The proposed interest rate for your new FHA loan. A lower rate is generally better.
- New Loan Term: The duration of the new loan in years. Extending the term can lower monthly payments but increase total interest paid over time.
- FHA Upfront MIP: A one-time premium paid at closing for the new loan. This is often financed into the loan.
- FHA Annual MIP: An ongoing premium paid monthly as part of your total mortgage payment. The rate can vary based on the loan-to-value ratio and term.
- Estimated Closing Costs: Fees associated with obtaining the new loan (appraisal, title, origination, etc.). These are factored into the overall cost of the refinance.
Key Formulas Used:
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New Loan Amount:
New Loan Amount = Current Loan Balance + (Current Loan Balance * FHA Upfront MIP Percentage) + Estimated Closing Costs (if not paid out-of-pocket) -
Monthly Principal & Interest (P&I) Payment:
Calculated using the standard mortgage payment formula (Amortization Formula):
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]Where:- M = Monthly Payment (P&I)
- P = New Loan Amount (Principal)
- i = Monthly Interest Rate (Annual Rate / 12)
- n = Total Number of Payments (Loan Term in Years * 12)
-
New Monthly MIP:
New Monthly MIP = (New Loan Amount * FHA Annual MIP Percentage) / 12 -
New Estimated Total Monthly Payment:
New Total Monthly Payment = Monthly P&I + New Monthly MIP + Monthly Property Taxes + Monthly Homeowner's Insurance(Note: This calculator focuses on P&I and MIP. Taxes and homeowner's insurance are not included in the calculation but are mentioned for completeness of a full mortgage payment.) -
Total Interest Paid Over New Loan Term:
Total Interest = (Monthly P&I * n) - P -
Total MIP Paid Over New Loan Term:
Total MIP Paid = New Monthly MIP * n -
Monthly Savings:
Estimated Monthly Savings = Current Monthly P&I (estimated) - New Monthly P&I(Note: A precise calculation of current P&I would require the original loan terms. This calculator focuses on the P&I difference based on the new terms vs. a hypothetical current P&I if rates were unchanged but balance reduced, or simply highlights the new P&I.) For simplicity, this calculator displays the new P&I and total new payment. The "Savings" are inferred by the reduction in P&I when comparing new vs. old terms.
When to Consider an FHA Refinance:
- Lower Interest Rates: If current market rates are significantly lower than your existing FHA loan rate.
- Lower Monthly Payments: To make your home more affordable.
- Accessing Equity: Through an FHA cash-out refinance (requires full refinance and appraisal).
- Removing PMI/MIP: While FHA loans have MIP, refinancing into a conventional loan might be an option to remove mortgage insurance if you have sufficient equity and good credit.
- Converting ARM to Fixed: If you have an FHA Adjustable Rate Mortgage (ARM) and want payment stability.
Disclaimer: This calculator provides an estimate only. Actual refinance costs and savings may vary. Consult with a qualified mortgage professional for personalized advice.