Home Refinance Savings Calculator
Use this calculator to estimate your potential monthly savings and determine the break-even point for refinancing your home mortgage. Compare your current loan terms with potential new terms and see if refinancing makes financial sense for you.
Current Loan Details
New Loan Details
Refinance Analysis
Current Monthly Payment:
New Monthly Payment:
Monthly Savings:
Break-Even Point:
Understanding Home Refinancing
Refinancing your home mortgage involves replacing your existing loan with a new one, often with different terms. The primary goal of refinancing is typically to secure a lower interest rate, reduce monthly payments, shorten the loan term, or convert equity into cash (cash-out refinance). This calculator focuses on rate-and-term refinancing, where the main objective is to save money on interest and/or lower your monthly principal and interest payment.
Key Factors in Refinancing
- Interest Rate: A lower interest rate is often the biggest driver for refinancing, as it directly reduces the cost of borrowing over the life of the loan.
- Loan Term: You can choose to shorten your loan term (e.g., from 30 to 15 years) to pay off your mortgage faster, or extend it to lower your monthly payments, though this may increase total interest paid.
- Closing Costs: Refinancing isn't free. You'll incur closing costs similar to when you first bought your home, including appraisal fees, origination fees, title insurance, and more. These costs can be paid upfront or rolled into the new loan amount.
- Break-Even Point: This is a crucial metric. It's the point in time when the savings from your lower monthly payments equal the total closing costs you paid for the refinance. If you plan to stay in your home longer than the break-even point, refinancing is generally a good financial move.
When Does Refinancing Make Sense?
Refinancing is often beneficial when:
- Current interest rates are significantly lower than your existing rate.
- Your credit score has improved, qualifying you for better rates.
- You want to reduce your monthly expenses.
- You want to pay off your mortgage faster by switching to a shorter term.
- You plan to stay in your home for several years beyond the break-even point.
Example Scenario:
Let's say you currently owe $250,000 on your mortgage at an annual interest rate of 4.5% with 25 years remaining. Your current monthly principal and interest payment is approximately $1,389.70.
You find a new loan offer for $250,000 at an annual interest rate of 3.5% over a new 30-year term. The closing costs for this refinance are $5,000, which you decide to roll into the new loan, making your new loan amount $255,000.
- Current Monthly Payment: ~$1,389.70
- New Monthly Payment (for $255,000 at 3.5% over 30 years): ~$1,145.00
- Monthly Savings: ~$244.70
- Break-Even Point: $5,000 (closing costs) / $244.70 (monthly savings) = approximately 20.43 months.
In this example, if you stay in your home for more than 20.43 months, you will start realizing net savings from the refinance.