Refinancing your mortgage can be a smart financial move, allowing you to potentially lower your interest rate, reduce your monthly payments, or shorten your loan term. However, it's essential to understand the costs involved and the potential savings before committing. This calculator will help you estimate your monthly savings and break-even point when refinancing your mortgage.
Understanding Mortgage Refinancing
When you refinance, you essentially take out a new mortgage to pay off your existing one. The primary reasons people refinance include:
Lowering Interest Rate: If current market interest rates are significantly lower than your existing loan's rate, refinancing can save you a substantial amount in interest over the life of the loan.
Reducing Monthly Payments: By securing a lower interest rate or extending the loan term, you can lower your monthly mortgage payment, freeing up cash flow.
Shortening Loan Term: If you can afford slightly higher monthly payments, refinancing to a shorter term (e.g., from a 30-year to a 15-year mortgage) can help you pay off your home faster and save on interest.
Cash-Out Refinance: This allows you to borrow more than you owe on your current mortgage and take the difference in cash, which can be used for home improvements, debt consolidation, or other major expenses.
Costs of Refinancing
It's crucial to factor in the closing costs associated with refinancing. These can include:
Appraisal fees
Title insurance
Lender fees
Recording fees
Credit report fees
These costs can range from 2% to 6% of the loan amount. Our calculator helps you determine if your potential savings outweigh these upfront expenses.
How to Use the Refinance Calculator
To estimate your potential savings, please provide the following information:
function calculateMonthlyPayment(principal, annualRate, years) {
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = years * 12;
var monthlyPayment = (principal * monthlyRate) / (1 – Math.pow(1 + monthlyRate, -numberOfPayments));
return isNaN(monthlyPayment) ? 0 : monthlyPayment;
}
function calculateTotalInterestPaid(principal, annualRate, years) {
var monthlyPayment = calculateMonthlyPayment(principal, annualRate, years);
var numberOfPayments = years * 12;
var totalPaid = monthlyPayment * numberOfPayments;
var totalInterest = totalPaid – principal;
return isNaN(totalInterest) ? 0 : totalInterest;
}
function calculateRefinanceSavings() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTermRemaining = parseFloat(document.getElementById("currentLoanTermRemaining").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseFloat(document.getElementById("newLoanTerm").value);
var refinanceClosingCosts = parseFloat(document.getElementById("refinanceClosingCosts").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(currentLoanTermRemaining) ||
isNaN(newInterestRate) || isNaN(newLoanTerm) || isNaN(refinanceClosingCosts) ||
currentLoanBalance <= 0 || currentInterestRate < 0 || currentLoanTermRemaining <= 0 ||
newInterestRate < 0 || newLoanTerm <= 0 || refinanceClosingCosts 0) {
breakEvenPointInMonths = refinanceClosingCosts / monthlySavings;
}
var outputHTML = "
Estimated Savings:
";
if (monthlySavings > 0) {
outputHTML += "Current Estimated Monthly Payment: $" + currentMonthlyPayment.toFixed(2) + "";
outputHTML += "New Estimated Monthly Payment: $" + newMonthlyPayment.toFixed(2) + "";
outputHTML += "Estimated Monthly Savings:$" + monthlySavings.toFixed(2) + "";
outputHTML += "Estimated Total Interest Paid (Current Loan): $" + currentTotalInterest.toFixed(2) + "";
outputHTML += "Estimated Total Interest Paid (New Loan): $" + newTotalInterest.toFixed(2) + "";
outputHTML += "Estimated Total Interest Saved Over New Loan Term:$" + (currentTotalInterest – newTotalInterest).toFixed(2) + "";
if (breakEvenPointInMonths > 0) {
outputHTML += "Break-Even Point: Approximately " + breakEvenPointInMonths.toFixed(1) + " months (" + (breakEvenPointInMonths / 12).toFixed(1) + " years).";
outputHTML += "This is how long it will take for your accumulated monthly savings to cover the closing costs.";
} else {
outputHTML += "Your monthly savings are not enough to cover the closing costs with these terms.";
}
if (totalSavingsOverNewTerm > 0) {
outputHTML += "Estimated Net Savings Over New Loan Term (after closing costs):$" + totalSavingsOverNewTerm.toFixed(2) + "";
} else {
outputHTML += "Estimated net savings over the new loan term are not positive after accounting for closing costs.";
}
} else {
outputHTML += "Based on these inputs, refinancing does not appear to offer immediate monthly savings.";
if (newLoanTerm < currentLoanTermRemaining) {
outputHTML += "However, if you are focused on paying off your mortgage faster, refinancing to a shorter term may be beneficial despite potentially higher monthly payments.";
}
}
resultDiv.innerHTML = outputHTML;
}