Mortgage Refinance Savings Calculator
Calculate your potential monthly savings and determine your break-even point for a mortgage refinance.
When Should You Refinance Your Mortgage?
Refinancing a mortgage involves replacing your existing home loan with a new one, typically to secure a lower interest rate, change the loan term, or tap into home equity. The primary goal for most homeowners is to reduce the monthly payment and the total interest paid over the life of the loan.
Understanding the Break-Even Point
The "break-even point" is one of the most critical metrics in mortgage refinancing. It represents the amount of time it will take for your monthly savings to cover the upfront closing costs of 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 your home before reaching this point, refinancing may actually cost you more than you save.
Realistic Refinance Example
Imagine you have a $300,000 balance on a loan with a 6.5% interest rate. Your current principal and interest payment is roughly $1,896. If you refinance into a new 30-year loan at 4.5% with $6,000 in closing costs:
- New Payment: Approximately $1,520
- Monthly Savings: $376
- Break-Even: ~16 months
In this scenario, if you plan to stay in the home for at least two more years, the refinance is financially beneficial.
Factors That Impact Your Savings
Keep in mind that while a lower rate is attractive, extending your loan term (e.g., going from 20 years remaining back to a new 30-year term) might lower your monthly payment but increase the total interest you pay over time. Always compare the Total Interest Paid on our calculator to see the long-term impact.