Understanding Home Refinancing and This Calculator
Refinancing your home mortgage involves replacing your existing home loan with a new one. People often refinance to take advantage of lower interest rates, change loan terms, or tap into their home's equity. This calculator helps you estimate the potential financial benefits of refinancing your current mortgage.
How the Calculation Works:
This calculator compares the total cost of your current loan over its remaining term with the total cost of a new loan after refinancing, factoring in the upfront costs of the refinance.
1. Current Loan Total Cost: We first calculate the monthly payment for your current loan based on the balance, interest rate, and remaining term. Then, we multiply this monthly payment by the total number of remaining months to get the total amount you'd pay if you kept your current loan.
2. New Loan Total Cost: Similarly, we calculate the monthly payment for the proposed new loan using its balance, interest rate, and term. This monthly payment is then multiplied by the total number of months in the new loan term.
3. Refinance Costs: The estimated costs associated with the refinancing process (e.g., appraisal fees, title insurance, origination fees) are added to the new loan's total cost.
4. Savings Calculation: The total savings are determined by subtracting the sum of the new loan's total cost and the refinance costs from the total cost of your current loan. We also calculate the difference in monthly payments to estimate monthly savings.
Key Inputs Explained:
Current Loan Balance: The outstanding amount you still owe on your existing mortgage.
Current Annual Interest Rate (%): The yearly interest rate on your current mortgage.
Remaining Loan Term (Years): The number of years left until your current mortgage is fully paid off.
New Loan Balance: The amount you intend to borrow with the new mortgage. This might be the same as your current balance, or it could include closing costs rolled in, or be a cash-out refinance amount.
New Annual Interest Rate (%): The yearly interest rate offered on the new mortgage you are considering.
New Loan Term (Years): The duration of the new mortgage you are considering. Shorter terms often mean higher monthly payments but less total interest paid, while longer terms mean lower monthly payments but more total interest.
Estimated Refinance Costs: The total fees and expenses you expect to pay to complete the refinancing process.
When to Consider Refinancing:
Lower Interest Rates: If market interest rates have dropped significantly since you got your current loan.
Shorter Loan Term: To pay off your home faster by switching to a shorter mortgage term.
Debt Consolidation: To consolidate high-interest debt into your mortgage (cash-out refinance).
Change Loan Type: To switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability, or vice-versa.
Disclaimer: This calculator provides an estimate for informational purposes only. Actual savings may vary based on exact loan terms, fees, and market conditions. It's always recommended to consult with a mortgage professional for personalized advice.
function calculateMonthlyPayment(principal, annualRate, termInYears) {
if (principal <= 0 || annualRate < 0 || termInYears <= 0) {
return 0;
}
var monthlyRate = annualRate / 100 / 12;
var numberOfMonths = termInYears * 12;
if (monthlyRate === 0) {
return principal / numberOfMonths;
}
var monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfMonths)) / (Math.pow(1 + monthlyRate, numberOfMonths) – 1);
return monthlyPayment;
}
function calculateRefinanceSavings() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTermRemaining = parseFloat(document.getElementById("currentLoanTermRemaining").value);
var newLoanBalance = parseFloat(document.getElementById("newLoanBalance").value);
var newAnnualInterestRate = parseFloat(document.getElementById("newAnnualInterestRate").value);
var newLoanTerm = parseFloat(document.getElementById("newLoanTerm").value);
var refinanceCosts = parseFloat(document.getElementById("refinanceCosts").value);
var savingsResultElement = document.getElementById("savingsResult");
var monthlySavingsResultElement = document.getElementById("monthlySavingsResult");
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(currentLoanTermRemaining) ||
isNaN(newLoanBalance) || isNaN(newAnnualInterestRate) || isNaN(newLoanTerm) ||
isNaN(refinanceCosts)) {
savingsResultElement.innerText = "Please enter valid numbers for all fields.";
monthlySavingsResultElement.innerText = "";
return;
}
// Ensure positive values for calculations where applicable
if (currentLoanBalance < 0 || currentInterestRate < 0 || currentLoanTermRemaining <= 0 ||
newLoanBalance < 0 || newAnnualInterestRate < 0 || newLoanTerm <= 0 || refinanceCosts < 0) {
savingsResultElement.innerText = "Please enter positive values for balances, rates, terms, and costs.";
monthlySavingsResultElement.innerText = "";
return;
}
var currentMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, currentInterestRate, currentLoanTermRemaining);
var currentTotalCost = currentMonthlyPayment * currentLoanTermRemaining * 12;
var newMonthlyPayment = calculateMonthlyPayment(newLoanBalance, newAnnualInterestRate, newLoanTerm);
var newTotalCost = newMonthlyPayment * newLoanTerm * 12;
var totalCostWithRefinance = newTotalCost + refinanceCosts;
var totalSavings = currentTotalCost – totalCostWithRefinance;
var monthlySavings = currentMonthlyPayment – newMonthlyPayment;
// Format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
});
savingsResultElement.innerText = formatter.format(totalSavings);
monthlySavingsResultElement.innerText = "(" + formatter.format(monthlySavings) + " per month)";
}