Mortgage Refinance Savings Calculator
Determine if refinancing your current mortgage will save you money over the long term.
Understanding Your Mortgage Refinance Savings
Refinancing a mortgage involves replacing your existing home loan with a new one, typically to secure a lower interest rate, reduce monthly payments, or change the loan duration. While it can save thousands of dollars, it is essential to factor in the closing costs, which usually range from 2% to 5% of the loan amount.
How This Calculator Works
The calculator compares your current monthly principal and interest payment against the projected payment of a new loan. It calculates the "Break-Even Point," which is the number of months it takes for your monthly savings to cover the upfront closing costs of the refinance.
Example Scenario
Imagine you have a $300,000 balance on a loan with 25 years remaining at 6.5% interest. Your current monthly payment is roughly $2,025. If you refinance into a new 30-year loan at 4.5% interest with $5,000 in closing costs:
- New Monthly Payment: $1,520
- Monthly Savings: $505
- Break-Even Point: 10 Months
In this case, after just 10 months, the refinance has paid for itself, and every month thereafter represents pure profit in your pocket.
Key Considerations
Refinancing isn't always the right move. If you plan to sell your home within the next two years, you might not reach the break-even point. Additionally, extending your term (e.g., from 15 years remaining to a new 30-year loan) might lower your monthly payment but could increase the total interest paid over the life of the loan. Always review the "Total Interest Saved" metric to see the long-term impact.