Home Mortgage Refinance Calculator
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Home Mortgage Refinance Calculator
Estimated Monthly Savings:
$0.00
Break-Even Point:
— months
Total Savings Over Remaining Term:
$0.00
Understanding Your Home Mortgage Refinance
Refinancing your home mortgage is the process of replacing your existing home loan with a new one. Homeowners often consider refinancing for several key reasons: to secure a lower interest rate, to change the loan term, to tap into home equity (cash-out refinance), or to switch loan types (e.g., from an adjustable-rate mortgage to a fixed-rate mortgage).
Why Refinance?
- Lower Interest Rate: If market interest rates have dropped since you took out your original loan, refinancing can significantly reduce your monthly payments and the total interest paid over the life of the loan.
- Reduce Loan Term: You might refinance into a shorter loan term to pay off your home faster, though this usually results in higher monthly payments.
- Access Home Equity: A cash-out refinance allows you to borrow against the equity you've built in your home, providing funds for renovations, debt consolidation, or other large expenses.
- Convert Loan Type: If you have an adjustable-rate mortgage (ARM) and are concerned about rising interest rates, you might refinance into a fixed-rate mortgage for payment stability.
How the Calculator Works
This calculator helps you estimate the potential financial benefits of refinancing. It compares your current mortgage's monthly payment with the estimated payment of a new, refinanced loan.
Key Calculations:
1. Current Monthly Principal & Interest (P&I): This is calculated using the standard mortgage payment formula:
$M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]$
Where:
- M = Monthly Payment
- P = Current Loan Balance
- i = Monthly Interest Rate (Annual Rate / 12)
- n = Number of Payments Remaining (Remaining Loan Term in Years * 12)
2. New Refinanced Monthly P&I: Calculated using the same formula as above, but with the New Interest Rate and the same loan term and remaining balance (for simplicity, though some lenders may adjust this slightly).
3. Estimated Monthly Savings: This is the difference between your current estimated monthly P&I payment and the new estimated monthly P&I payment.
$Monthly Savings = Current Monthly P&I – New Monthly P&I$
4. Break-Even Point: This is the point in time (in months) when your total savings from the lower monthly payment offset the closing costs of the refinance.
$Break-Even Point (Months) = Refinance Closing Costs / Monthly Savings$
A lower break-even point indicates that you'll recoup your refinance costs more quickly.
5. Total Savings Over Remaining Term: This estimates the total interest savings you could achieve by refinancing, assuming you keep the loan for its entire remaining term, minus the closing costs.
$Total Savings = (Monthly Savings * Total Number of Months Remaining) – Refinance Closing Costs$
Where:
$Total Number of Months Remaining = Remaining Loan Term in Years * 12$
Important Considerations
This calculator provides an estimate. Actual savings may vary based on:
- Closing Costs: These can include appraisal fees, title insurance, origination fees, and more. Ensure you get a Loan Estimate for precise figures.
- Loan Term Changes: If you change your loan term, the monthly payment and total interest paid will change significantly.
- Amortization: The exact payment calculation depends on how much principal vs. interest is paid each month. This calculator uses a simplified P&I calculation for comparison.
- Recasting vs. Refinancing: Some lenders allow loan "recasting" where you make a lump-sum principal payment without changing the loan terms. This is different from refinancing.
- Loan Approval: Refinancing requires a new loan application and approval process, subject to your creditworthiness and current market conditions.
Always consult with a mortgage professional and carefully review all loan documents before making a refinancing decision.
function calculateMortgagePayment(principal, annualRate, termInYears) {
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = termInYears * 12;
if (monthlyRate === 0) {
return principal / numberOfPayments;
}
var payment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
return isNaN(payment) ? 0 : payment;
}
function formatCurrency(amount) {
return "$" + amount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
function formatMonths(months) {
if (isNaN(months) || !isFinite(months) || months < 0) {
return "–";
}
return Math.round(months) + " months";
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var loanTermRemaining = parseFloat(document.getElementById("loanTermRemaining").value);
var refiClosingCosts = parseFloat(document.getElementById("refiClosingCosts").value);
var monthlySavingsElement = document.getElementById("monthlySavings");
var breakEvenPointElement = document.getElementById("breakEvenPoint");
var totalSavingsElement = document.getElementById("totalSavings");
// Reset previous results
monthlySavingsElement.textContent = "$0.00";
breakEvenPointElement.textContent = "– months";
totalSavingsElement.textContent = "$0.00";
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(newInterestRate) || isNaN(loanTermRemaining) || isNaN(refiClosingCosts)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (currentInterestRate <= 0 || newInterestRate <= 0 || loanTermRemaining <= 0 || currentLoanBalance <= 0) {
alert("Interest rates, loan balance, and term must be positive values.");
return;
}
if (refiClosingCosts 0) {
breakEvenPoint = refiClosingCosts / monthlySavings;
} else {
breakEvenPoint = Infinity; // Cannot break even if no monthly savings
}
var totalInterestSavings = (monthlySavings * totalMonthsRemaining) – refiClosingCosts;
monthlySavingsElement.textContent = formatCurrency(monthlySavings);
breakEvenPointElement.textContent = formatMonths(breakEvenPoint);
totalSavingsElement.textContent = formatCurrency(totalInterestSavings);
// Add visual cue for positive savings
if (monthlySavings > 0) {
monthlySavingsElement.style.color = "#28a745";
totalSavingsElement.style.color = "#28a745";
} else {
monthlySavingsElement.style.color = "#dc3545"; // Red for negative savings
totalSavingsElement.style.color = "#dc3545";
}
if (breakEvenPoint === Infinity) {
breakEvenPointElement.textContent = "N/A (No monthly savings)";
breakEvenPointElement.style.color = "#dc3545";
} else {
breakEvenPointElement.style.color = "#333";
}
}