Home Refinance Savings Calculator
Use this calculator to compare your current mortgage terms with a potential new refinance loan. It helps you understand the potential monthly savings, total cost differences, and how long it might take to break even on your refinancing costs.
Current Mortgage Details
Proposed New Refinance Details
Refinance Costs
Understanding Home Refinancing and How to Use This Calculator
Home refinancing involves replacing your existing mortgage with a new one, often with different terms. The primary reasons homeowners consider refinancing include securing a lower annual loan percentage, reducing monthly payments, changing the loan term, or cashing out home equity.
Why Refinance Your Home?
- Lower Annual Loan Percentage: If market rates have dropped since you took out your original mortgage, refinancing can significantly reduce the annual percentage you pay, leading to lower monthly payments and substantial savings over the life of the loan.
- Reduced Monthly Payments: By securing a lower annual loan percentage or extending your loan term, you can decrease your monthly mortgage obligation, freeing up cash for other expenses or savings.
- Shorter Loan Term: Conversely, if you can afford higher monthly payments, you might refinance to a shorter term (e.g., from 30 years to 15 years). This typically comes with a lower annual loan percentage and allows you to pay off your home faster, saving a considerable amount in total loan charges.
- Cash-Out Refinance: This option allows you to borrow more than your current mortgage balance, converting a portion of your home equity into cash. This cash can be used for home improvements, debt consolidation, or other large expenses.
- Switching Loan Types: You might refinance from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for more payment stability, or vice-versa if you anticipate moving soon.
Key Factors in Refinancing
When considering a refinance, several factors come into play:
- Current Annual Loan Percentage vs. New Annual Loan Percentage: The difference between your existing loan's annual percentage and the new one is crucial. Even a small reduction can lead to significant savings.
- Loan Term: Changing your loan term (e.g., from 30 years remaining to a new 15-year or 30-year loan) will impact your monthly payments and the total amount you pay over time.
- Closing Costs: Refinancing isn't free. You'll incur closing costs, similar to when you first bought your home. These can include appraisal fees, title insurance, lender fees, and more. It's essential to factor these into your decision.
- Break-Even Point: This is the time it takes for the savings from your lower monthly payments to offset the closing costs of the refinance. If you plan to move before reaching your break-even point, refinancing might not be financially beneficial.
How to Use This Calculator
Our Home Refinance Savings Calculator simplifies the comparison process:
- Current Mortgage Details: Input your current remaining principal balance, the annual loan percentage you're currently paying, and the number of months you have left on your existing mortgage term.
- Proposed New Refinance Details: Enter the principal amount for your proposed new mortgage (this might be the same as your current principal, or higher if you're doing a cash-out refinance), the new annual loan percentage you anticipate, and the new loan term in months.
- Refinance Costs: Provide an estimate of the total closing costs associated with the new refinance. Your lender can give you a detailed breakdown.
- Calculate: Click the "Calculate Refinance Savings" button to see a detailed breakdown of your potential savings or costs.
Interpreting the Results
The calculator will provide you with:
- Current Monthly Payment: What you are currently paying each month.
- New Monthly Payment: What your payment would be with the proposed refinance.
- Monthly Payment Difference: The immediate impact on your budget. A positive number indicates monthly savings.
- Total Cost Remaining on Current Mortgage: The total amount you would pay if you kept your current loan until the end of its term.
- Total Cost of New Mortgage: The total amount you would pay with the new loan, including all closing costs.
- Total Savings/Cost Over Loan Term: The overall financial benefit or cost of refinancing over the entire life of the new loan.
- Break-Even Point (Months): How many months it will take for your monthly savings to cover the refinance closing costs.
By using this tool, you can make an informed decision about whether refinancing is the right move for your financial situation.
Example Scenario:
Let's say you have a remaining principal of $250,000 on your current mortgage with an annual loan percentage of 6.5% and 240 months (20 years) left. Your current monthly payment is approximately $1,854.07.
You find a new refinance offer for $250,000 at an annual loan percentage of 5.5% over 360 months (30 years), with estimated closing costs of $5,000.
Using the calculator:
- Current Principal: $250,000
- Current Annual Loan Percentage: 6.5%
- Current Months Left: 240
- New Loan Principal: $250,000
- New Annual Loan Percentage: 5.5%
- New Months Term: 360
- Refinance Closing Costs: $5,000
The calculator would show:
- Current Monthly Payment: $1,854.07
- New Monthly Payment: $1,419.47
- Monthly Payment Difference: $434.60 (Savings)
- Total Cost Remaining on Current Mortgage: $444,976.80
- Total Cost of New Mortgage: $516,009.20
- Total Savings/Cost Over Loan Term: -$71,032.40 (This indicates an increase in total cost due to extending the term, despite lower monthly payments)
- Break-Even Point (Months): 11.50 months
This example highlights that while monthly payments decrease, extending the loan term can significantly increase the total cost over the life of the loan. The calculator helps you weigh these trade-offs.