Calculate your potential monthly savings and determine your break-even point when refinancing your mortgage.
Current Monthly Payment (P&I):$0.00
New Monthly Payment (P&I):$0.00
Monthly Savings:$0.00
Total Interest Saved (Lifetime):$0.00
Break-Even Point:0 months
Is Refinancing Your Mortgage Worth It?
Refinancing a home loan can be a powerful financial move, but it is not always the right choice for every homeowner. The primary goal of refinancing is typically to lower your monthly payment, reduce the total interest paid over the life of the loan, or tap into home equity. This calculator helps you analyze the numbers to see if the "math adds up."
Understanding the Break-Even Point
One of the most critical metrics in mortgage refinancing is the break-even point. This is the amount of time it takes for your monthly savings to "pay back" the closing costs associated with the new loan. For example, if your refinance costs $5,000 and you save $200 per month, your break-even point is 25 months. If you plan to sell the home before that time, refinancing might actually cost you money.
Key Factors to Consider
Interest Rate Differential: Traditionally, experts suggested waiting for a 1% to 2% drop in rates, but even a 0.5% drop can be beneficial on larger loan balances.
Closing Costs: Expect to pay between 2% and 5% of the loan amount in fees, including appraisals, origination fees, and title insurance.
Loan Term: If you refinance from a 30-year loan (with 20 years left) into a new 30-year loan, you are extending your debt by 10 years, which may increase the total interest paid even if your monthly payment drops.
Example Calculation
Imagine you have a $350,000 balance on a loan at 6.5%. Your current monthly payment (Principal & Interest) is roughly $2,212. If you refinance into a new 30-year loan at 5.25%, your new payment drops to $1,932. This results in a monthly saving of $280. If the closing costs are $5,000, it will take you approximately 18 months to break even.
function calculateRefinance() {
var balance = parseFloat(document.getElementById('currentBalance').value);
var currentRate = parseFloat(document.getElementById('currentRate').value) / 100 / 12;
var newRate = parseFloat(document.getElementById('newRate').value) / 100 / 12;
var newTermMonths = parseFloat(document.getElementById('newTerm').value) * 12;
var remainingMonths = parseFloat(document.getElementById('remainingYears').value) * 12;
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
if (isNaN(balance) || isNaN(currentRate) || isNaN(newRate) || isNaN(newTermMonths) || isNaN(closingCosts)) {
alert("Please enter valid numerical values in all fields.");
return;
}
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Current Payment Logic
var currentPayment = balance * (currentRate * Math.pow(1 + currentRate, remainingMonths)) / (Math.pow(1 + currentRate, remainingMonths) – 1);
if (currentRate === 0) currentPayment = balance / remainingMonths;
// New Payment Logic
var newPayment = balance * (newRate * Math.pow(1 + newRate, newTermMonths)) / (Math.pow(1 + newRate, newTermMonths) – 1);
if (newRate === 0) newPayment = balance / newTermMonths;
var monthlySavings = currentPayment – newPayment;
// Lifetime Interest Logic
var totalCurrentInterestRemaining = (currentPayment * remainingMonths) – balance;
var totalNewInterest = (newPayment * newTermMonths) – balance;
var netLifetimeSavings = totalCurrentInterestRemaining – totalNewInterest – closingCosts;
// Break Even Logic
var breakEvenMonths = closingCosts / monthlySavings;
// Display Results
document.getElementById('refiResults').style.display = 'block';
document.getElementById('oldPaymentText').innerHTML = '$' + currentPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('newPaymentText').innerHTML = '$' + newPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlySavingsText').innerHTML = '$' + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalInterestSavedText').innerHTML = '$' + netLifetimeSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (monthlySavings > 0) {
document.getElementById('breakEvenText').innerHTML = Math.ceil(breakEvenMonths) + " months";
document.getElementById('savingsHighlight').innerHTML = "You could save $" + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + " every month!";
document.getElementById('savingsHighlight').style.backgroundColor = "#e7f4e9";
document.getElementById('savingsHighlight').style.color = "#2e7d32";
} else {
document.getElementById('breakEvenText').innerHTML = "Never";
document.getElementById('savingsHighlight').innerHTML = "This refinance may not save you money on a monthly basis.";
document.getElementById('savingsHighlight').style.backgroundColor = "#fdeaea";
document.getElementById('savingsHighlight').style.color = "#c62828";
}
}