Mortgage Refinance Savings Calculator
Refinance Analysis Results
New Monthly Payment:
Monthly Savings:
Break-Even Point:
Lifetime Interest Savings:
Understanding Your Mortgage Refinance Savings
Deciding whether to refinance your mortgage is a significant financial move. While a lower interest rate is the primary motivator, a true refinance analysis requires looking at the "break-even point"—the moment your monthly savings offset the upfront closing costs of the new loan.
How to Use the Refinance Calculator
To get an accurate picture of your potential savings, you will need the following information from your latest mortgage statement:
- Remaining Balance: This is the current principal you still owe on your home.
- Current Rate: Your existing annual interest rate.
- Remaining Term: How many years are left on your current mortgage schedule.
- New Rate & Term: The proposed terms offered by your lender.
- Closing Costs: Typically 2% to 5% of the loan amount, covering appraisal, title insurance, and origination fees.
The Math Behind the Savings
Our calculator uses the standard amortization formula to determine your monthly principal and interest payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where M is the monthly payment, P is the principal balance, i is the monthly interest rate, and n is the number of months in the term.
Is Refinancing Worth It? (Example)
Imagine you have a $300,000 balance at 6.5% with 25 years remaining. Your current payment is roughly $2,025. If you refinance into a 30-year loan at 4.5% with $6,000 in closing costs:
- New Monthly Payment: $1,520
- Monthly Savings: $505
- Break-Even Point: 11.8 months
In this scenario, if you plan to stay in the home for more than one year, refinancing is a highly beneficial financial decision as you save over $500 every single month thereafter.