Mortgage Refinance Savings Calculator
Determine if refinancing your home loan will actually save you money.
New Monthly Payment (P&I):
$0.00
Monthly Savings:
$0.00
Total Savings (Over Term):
$0.00
Break-Even Point:
0 months
How to Use the Mortgage Refinance Calculator
Deciding whether to refinance your mortgage involves more than just looking at a lower interest rate. You must account for the closing costs associated with the new loan and how long you plan to stay in the home. Our calculator helps you visualize the "Break-Even Point"—the moment where your cumulative monthly savings finally surpass the upfront cost of the refinance.
Understanding the Calculation
To calculate your new monthly payment, we use the standard amortization formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M: Monthly payment
- P: Principal loan amount (Your remaining balance)
- i: Monthly interest rate (Annual rate divided by 12)
- n: Number of months (Years multiplied by 12)
Example Refinance Scenario
Imagine you have a $300,000 balance on a loan with a 7% interest rate, and your current payment is $2,100. You find a new 30-year loan at 4.5%. The closing costs are $5,000.
- New Payment: Approx. $1,520.06
- Monthly Savings: $579.94
- Break-Even: $5,000 / $579.94 = 8.6 months
In this scenario, if you plan to stay in your home for more than 9 months, refinancing is a financially sound decision.
Factors to Consider Before Refinancing
Before signing the paperwork, consider these three critical factors:
- Closing Costs: These typically range from 2% to 5% of the loan amount. Ensure the savings justify these fees.
- Loan Term: If you are 10 years into a 30-year mortgage and refinance into a new 30-year mortgage, you are extending your debt timeline. Consider a 15-year or 20-year term to keep your payoff date consistent.
- Equity: If your home value has dropped, you might need to pay for Private Mortgage Insurance (PMI) again, which could negate your interest rate savings.