Calculate potential savings from refinancing your home loan.
Your estimated monthly savings will appear here.
Understanding Mortgage Refinancing and Savings
Refinancing your mortgage involves replacing your existing home loan with a new one. This can be done for various reasons, such as securing a lower interest rate, changing the loan term, or accessing home equity. The primary goal for many homeowners considering refinancing is to reduce their monthly payments, save money on interest over the life of the loan, or both.
How the Refinance Calculator Works
This calculator helps you estimate the potential monthly savings you could achieve by refinancing. It compares your current mortgage payment with the projected payment on a new loan after refinancing. It also considers the closing costs associated with the new loan, as these costs need to be factored in to determine the true break-even point and overall savings.
The calculator performs the following calculations:
Current Monthly Payment: It first calculates the current monthly principal and interest (P&I) payment using the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
where:
M = Monthly Payment
P = Principal Loan Amount (Current Loan Balance)
i = Monthly Interest Rate (Current Annual Rate / 12)
n = Total Number of Payments (Current Loan Term in Years * 12)
New Monthly Payment: It then calculates the projected monthly P&I payment for the new loan using the same formula, with the new interest rate and new loan term.
Estimated Monthly Savings: The difference between the current monthly payment and the new monthly payment is calculated.
Break-Even Point: This calculator also estimates how long it would take for the monthly savings to offset the closing costs. This is calculated by dividing the total closing costs by the estimated monthly savings.
When Should You Consider Refinancing?
Lower Interest Rates: If market interest rates have dropped significantly since you took out your original mortgage, refinancing to a lower rate can save you a substantial amount of money on interest over time.
Shorter Loan Term: You might refinance to a shorter loan term (e.g., from 30 years to 15 years) to pay off your mortgage faster and reduce the total interest paid, even if the monthly payment increases.
Longer Loan Term: If you're struggling with current payments, refinancing to a longer loan term can lower your monthly payments, but you will likely pay more interest over the life of the loan.
Debt Consolidation or Home Improvement: You can refinance into a cash-out refinance to tap into your home's equity for other expenses.
Important Considerations
Refinancing isn't always the right choice. Always consider:
Closing Costs: These can add thousands of dollars to the cost of refinancing. Make sure your projected savings will outweigh these costs over time. The break-even point calculated helps with this.
Loan Type: Ensure the new loan type (e.g., fixed-rate, adjustable-rate) fits your financial goals and risk tolerance.
Credit Score: Lenders will assess your creditworthiness based on your current credit score, which affects the interest rate you'll be offered.
Market Conditions: Keep an eye on interest rate trends.
Use this calculator as a tool to get an estimate. For precise figures and personalized advice, consult with a mortgage professional.
function calculateMortgagePayment(principal, annualRate, termInYears) {
if (isNaN(principal) || isNaN(annualRate) || isNaN(termInYears) || principal <= 0 || annualRate < 0 || termInYears <= 0) {
return 0;
}
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = termInYears * 12;
if (monthlyRate === 0) {
return principal / numberOfPayments;
}
var payment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
return payment;
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTerm = parseFloat(document.getElementById("currentLoanTerm").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseFloat(document.getElementById("newLoanTerm").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
var resultDiv = document.getElementById("result");
// Input validation
if (isNaN(currentLoanBalance) || currentLoanBalance <= 0 ||
isNaN(currentInterestRate) || currentInterestRate < 0 ||
isNaN(currentLoanTerm) || currentLoanTerm <= 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(newLoanTerm) || newLoanTerm <= 0 ||
isNaN(closingCosts) || closingCosts 0) {
var breakEvenMonths = closingCosts / monthlySavings;
var formattedBreakEven = breakEvenMonths.toFixed(1);
var totalInterestSaved = (currentMonthlyPayment * currentLoanTerm * 12) – (newMonthlyPayment * newLoanTerm * 12) – (currentLoanBalance – (currentLoanBalance – (currentMonthlyPayment – calculateMortgagePayment(currentLoanBalance, currentInterestRate, currentLoanTerm -1)) )) ; // A simplified interest saving calculation for display
var totalInterestCurrent = calculateMortgagePayment(currentLoanBalance, currentInterestRate, currentLoanTerm) * currentLoanTerm * 12 – currentLoanBalance;
var totalInterestNew = calculateMortgagePayment(currentLoanBalance, newInterestRate, newLoanTerm) * newLoanTerm * 12 – currentLoanBalance;
message = `Estimated Monthly Savings: $${parseFloat(formattedMonthlySavings).toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}
Break-Even Point: Approximately ${formattedBreakEven} months
Estimated Total Interest Saved (over new loan term): $${(totalInterestCurrent – totalInterestNew).toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}`;
bgColor = "var(–success-green)";
textColor = "white";
} else if (monthlySavings < 0) {
message = `Your new monthly payment ($${(-monthlySavings).toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}) would be higher than your current payment.`;
bgColor = "#ffc107"; // Warning yellow
textColor = "#343a40";
} else {
message = "Your monthly payments would remain the same after refinancing.";
bgColor = "#e9ecef"; // Light gray
textColor = "#343a40";
}
resultDiv.innerHTML = message;
resultDiv.style.backgroundColor = bgColor;
resultDiv.style.color = textColor;
}