Estimate your potential savings by refinancing your current mortgage. Compare new loan terms, interest rates, and closing costs to find the best option for your financial goals.
Mortgage Refinance Savings Estimator
Enter the remaining amount on your current mortgage.
Enter your current annual interest rate (e.g., 4.5 for 4.5%).
Enter the estimated new annual interest rate for your refinance.
15 Years
20 Years
25 Years
30 Years
35 Years
40 Years
Select the desired term for your new mortgage.
Include all fees, points, and third-party charges.
Refinance Analysis
Estimated Monthly Savings
$0.00
Current Estimated Monthly Payment
$0.00
New Estimated Monthly Payment
$0.00
Total Interest Paid (New Loan)
$0.00
Total Interest Paid (Remaining on Old Loan)
$0.00
Break-Even Point (Months)
0 Months
Total Cost Over New Term (Incl. Costs)
$0.00
This calculator estimates monthly mortgage payments using the standard amortization formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the principal loan amount, i is the monthly interest rate, and n is the total number of payments. Savings and break-even points are derived from comparing these calculated payments and considering closing costs.
Payment Comparison Over Time
Comparison of total principal and interest paid over the life of the loan for the current remaining balance vs. the new loan.
Loan Amortization Snapshot
Period
Starting Balance
Payment
Principal Paid
Interest Paid
Ending Balance
Enter values and click "Calculate Savings" to see amortization details.
A sample of the amortization schedule for the new loan, illustrating how payments are applied over time.
What is a Mortgage Refinance?
A mortgage refinance is the process of replacing your existing home loan with a new one. Borrowers typically refinance to take advantage of lower interest rates, reduce their monthly payments, shorten their loan term, tap into home equity for cash, or switch from an adjustable-rate mortgage to a fixed-rate mortgage. Refinancing involves a new loan application, credit check, and closing costs, similar to when you first purchased your home. Understanding the bankrate mortgage refinance calculator can help you determine if refinancing is a financially sound decision for your specific situation.
Who should consider refinancing?
Homeowners with a current mortgage rate significantly higher than current market rates.
Individuals looking to shorten their loan term to pay off their mortgage faster.
Borrowers who want to convert their adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability.
Those who need to access their home equity for significant expenses like home improvements or debt consolidation.
Common Misconceptions:
Myth: Refinancing always lowers your monthly payment. While often the goal, if you extend the loan term or refinance into a higher rate, your payment might not decrease or could even increase.
Myth: Refinancing is free. There are always closing costs associated with refinancing, which need to be factored into the savings calculation.
Myth: You can only refinance after a certain period. You can refinance at any time, though it's most beneficial when rates drop significantly or your financial situation changes.
Mortgage Refinance Formula and Mathematical Explanation
The core of mortgage refinancing calculations relies on the standard mortgage payment formula (an annuity formula), which determines the fixed periodic payment required to amortize a loan over a set period. This helps us compare your current loan's estimated payment with a potential new loan's payment.
The Monthly Payment Formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
Variable
Meaning
Unit
Typical Range
M
Monthly Mortgage Payment
Currency ($)
$0 – $10,000+
P
Principal Loan Amount (Current Balance or New Loan Amount)
Currency ($)
$10,000 – $1,000,000+
i
Monthly Interest Rate
Decimal (e.g., 0.035 for 3.5%)
0.000833 (0.1%) – 0.0833 (8.33%)
n
Total Number of Payments (Loan Term in Months)
Number
180 (15 yrs) – 480 (40 yrs)
Variables used in the mortgage payment calculation.
To calculate the monthly interest rate (i), we divide the annual interest rate by 12: `i = (Annual Rate / 100) / 12`.
To find the total number of payments (n), we multiply the loan term in years by 12: `n = Term in Years * 12`.
Calculating Savings:
Calculate the estimated monthly payment (Mcurrent) for your remaining loan term using the current balance and current rate.
Calculate the estimated monthly payment (Mnew) for your new loan term using the new balance (current balance + closing costs, sometimes), new rate, and new term.
Calculate the estimated monthly savings: Mcurrent – Mnew.
Break-Even Point: This is calculated by dividing the total closing costs by the estimated monthly savings. It tells you how many months it will take for your savings to recoup the upfront costs of refinancing.
Break-Even Point (Months) = Closing Costs / Monthly Savings
Practical Examples (Real-World Use Cases)
Example 1: Rate Reduction
Sarah has a remaining balance of $250,000 on her mortgage at 5.0% interest with 25 years left. Current market rates are 3.75%. She estimates closing costs of $4,500.
Inputs:
Current Balance: $250,000
Current Rate: 5.0%
Current Term Remaining: 25 Years (300 months)
New Rate: 3.75%
New Term: 30 Years (360 months)
Closing Costs: $4,500
Analysis using the bankrate mortgage refinance calculator:
Current Estimated Monthly Payment: ~$1,498.77
New Estimated Monthly Payment: ~$1,151.81 (for a 30-year loan at 3.75%)
Interpretation: Sarah could significantly lower her monthly payment by $346.96. Even though she's extending her loan term, the lower rate offers substantial immediate relief. She'll break even on her closing costs in just 13 months, making this refinance a strong consideration.
Example 2: Shorter Term, Stable Payment
Mark and Lisa owe $400,000 on their mortgage at 4.0% with 20 years remaining. They qualify for a new loan at 3.5% for a 15-year term. Closing costs are $6,000.
Inputs:
Current Balance: $400,000
Current Rate: 4.0%
Current Term Remaining: 20 Years (240 months)
New Rate: 3.5%
New Term: 15 Years (180 months)
Closing Costs: $6,000
Analysis using the bankrate mortgage refinance calculator:
Current Estimated Monthly Payment: ~$2,450.79
New Estimated Monthly Payment: ~$2,746.08 (for a 15-year loan at 3.5%)
Estimated Monthly Savings: $2,450.79 – $2,746.08 = -$295.29 (This is an increase)
Break-Even Point: Not applicable in the traditional sense as the payment increased, but the total interest paid will be significantly lower.
Total Interest Paid (Remaining on Old Loan): ~$88,190
Total Interest Paid (New Loan): ~$94,295 (including closing costs)
Interpretation: Although the monthly payment increases by $295.29, Mark and Lisa will pay off their mortgage 5 years sooner. They will pay approximately $5,905 less in total interest over the life of the loan compared to staying with their original loan. This is a classic trade-off: a higher payment for faster equity buildup and reduced total interest. The calculator helps visualize this choice.
How to Use This Bankrate Mortgage Refinance Calculator
Our Bankrate mortgage refinance calculator is designed to be intuitive and provide clear insights into your potential refinancing scenario. Follow these steps:
Enter Current Loan Details: Input your current remaining mortgage balance and your current interest rate.
Input New Loan Details: Enter the new interest rate you have been offered or anticipate receiving. Select the desired term (in years) for your new mortgage.
Estimate Closing Costs: Accurately enter all anticipated closing costs. This includes lender fees, appraisal fees, title insurance, recording fees, and any discount points you might pay to lower the interest rate. If you're unsure, ask your lender for a Loan Estimate document.
Calculate: Click the "Calculate Savings" button.
Reading the Results:
Estimated Monthly Savings: This is the primary indicator. A positive number means you're projected to save money each month. A negative number indicates your payment would increase.
Current & New Estimated Monthly Payments: See the direct comparison of your payment amounts.
Total Interest Paid (New Loan vs. Remaining on Old): Compare the total interest you'll pay over the life of the new loan versus what you'd pay if you kept your current mortgage.
Break-Even Point (Months): Crucial for understanding how long it takes for your monthly savings to offset the initial closing costs. If the break-even point is longer than you plan to stay in the home, refinancing might not be worthwhile.
Total Cost Over New Term: This shows the sum of all new monthly payments plus the closing costs, giving you the total financial commitment for the new loan.
Charts and Tables: Visualize the payment comparison over time and review a sample amortization schedule for the new loan.
Decision-Making Guidance:
If your monthly savings are significant and the break-even point is relatively short (e.g., less than 1-2 years, depending on your plans), refinancing is likely beneficial.
If the goal is to pay off the loan faster, even if the monthly payment increases, compare the total interest paid and the payoff date.
Always consider the "why" behind refinancing. Are you saving money, reducing risk (e.g., ARM to Fixed), or accessing equity?
Remember that closing costs are a significant factor. Rolling them into the loan increases your principal balance and total interest paid.
Key Factors That Affect Bankrate Mortgage Refinance Calculator Results
Several variables directly influence the outcome of your refinance calculations. Understanding these factors helps you input accurate data and interpret the results correctly. Our bankrate mortgage refinance calculator incorporates these key elements:
Interest Rates: This is often the most significant factor. A lower interest rate dramatically reduces the monthly payment and total interest paid over the loan's life. Even a small decrease (e.g., 0.5%) can lead to substantial savings, especially on large loan balances. Conversely, a higher rate will increase payments.
Loan Term: Refinancing into a shorter term (e.g., 15 or 20 years) typically results in higher monthly payments but significantly less total interest paid and faster equity buildup. A longer term (e.g., 30 or 40 years) usually lowers monthly payments but increases the total interest paid over time.
Closing Costs: These upfront fees (appraisal, title insurance, origination fees, points, etc.) add to the loan's total cost. High closing costs require more time (a longer break-even period) to recoup through monthly savings. Sometimes, borrowers opt to roll these costs into the new loan, increasing the principal and thus the total interest paid.
Current Loan Balance vs. New Loan Amount: The principal amount is the base for all interest calculations. If you're only refinancing to lower your rate, using your current remaining balance is key. If you're also pulling cash out (cash-out refinance), the new, higher principal will increase both your payment and total interest paid.
Your Credit Score and Financial Profile: While not directly input into the calculator, your creditworthiness determines the interest rate you qualify for. A higher credit score generally unlocks lower rates, making refinancing more advantageous. Lenders also consider your debt-to-income ratio.
Economic Conditions and Inflation: Broad economic factors influence interest rate trends. If inflation is high, central banks may raise rates, making refinancing less attractive. Conversely, during economic downturns, rates may fall, creating refinancing opportunities. Inflation also impacts the real value of future payments; saving money on a mortgage might be more critical if your other living costs are rising.
Home Equity: Lenders often have Loan-to-Value (LTV) ratio requirements for refinances. Having sufficient equity (meaning your loan balance is a smaller percentage of your home's value) improves your chances of approval and can help you secure better rates.
Frequently Asked Questions (FAQ)
Q1: How often should I check if I can refinance my mortgage?
It's wise to periodically check mortgage rates, especially if you see significant drops in the market (e.g., 0.5% or more). Also, reconsider refinancing if your financial situation changes significantly (e.g., improved credit score, increased income).
Q2: What are discount points, and how do they affect refinancing?
Discount points are fees paid directly to the lender at closing in exchange for a reduced interest rate. Each point typically costs 1% of the loan amount. Our calculator assumes points are part of closing costs, potentially lowering the rate but increasing upfront expenses. You need to weigh the cost of points against the long-term interest savings.
Q3: Can I refinance if I have bad credit?
It might be challenging. Lenders use credit scores to assess risk. If your credit is poor, you may not qualify for the best rates, or you might not qualify at all. Focus on improving your credit score before applying. Some specialized loan programs might exist, but rates will likely be higher.
Q4: What is a cash-out refinance?
A cash-out refinance allows you to borrow more than your outstanding mortgage balance and receive the difference in cash. This can be used for home improvements, debt consolidation, or other large expenses. However, it increases your loan principal, monthly payment, and total interest paid.
Q5: Is it worth refinancing if I plan to sell my home soon?
Generally, no. If you plan to sell within a few years (typically less than the break-even period), the closing costs of refinancing may outweigh any potential short-term savings. Focus on calculating the break-even point carefully.
Q6: How do closing costs impact my refinance decision?
Closing costs are a critical factor. They represent the upfront investment required to obtain the new loan. The calculator helps you determine the break-even point – the time it takes for your monthly savings to cover these costs. If the break-even period is too long for your timeline, refinancing might not be cost-effective.
Q7: What's the difference between refinancing and a home equity loan?
Refinancing replaces your *entire* existing mortgage with a new one. A home equity loan (or HELOC) is a *separate* loan taken out *against* the equity in your home, in addition to your primary mortgage. Refinancing often aims to change the terms of the primary mortgage, while home equity products provide additional funds.
Q8: Can I refinance an FHA or VA loan?
Yes. You can refinance FHA and VA loans, often into government-backed refinance programs (like FHA Streamline Refinance) or conventional loans. These programs may have specific requirements and benefits, such as reduced paperwork or no appraisal needed.