Mortgage Refinance Savings Calculator
Calculate your potential monthly savings and break-even point
Current Loan
New Loan
Current Payment: $0.00
New Payment: $0.00
How a Mortgage Refinance Calculator Helps You Save
Deciding when to refinance your mortgage is one of the most significant financial decisions a homeowner can make. A mortgage refinance involves replacing your existing home loan with a new one, typically to secure a lower interest rate, change the loan term, or convert equity into cash.
Understanding the Key Metrics
To determine if refinancing makes sense, you must look beyond just the interest rate. This calculator evaluates four critical factors:
- Monthly Savings: The difference between your current principal and interest payment and your new projected payment.
- Closing Costs: The fees associated with the new loan, which typically range from 2% to 5% of the loan amount.
- Break-Even Point: The number of months it will take for your monthly savings to cover the upfront closing costs. If you plan to sell the home before reaching this point, refinancing may not be beneficial.
- Total Interest Savings: The total amount of money you will save over the entire life of the new loan compared to the remaining life of the old loan.
Real-World Refinance Example
Imagine you have a $300,000 balance remaining on a 30-year mortgage at 6.5% interest. Your current monthly principal and interest payment is approximately $2,022.62.
If you refinance into a new 30-year loan at 5.0% interest with $5,000 in closing costs:
- Your new monthly payment becomes $1,610.46.
- Your monthly savings is $412.16.
- Your break-even point is approximately 12.1 months ($5,000 / $412.16).
In this scenario, as long as you stay in the home for more than a year, the refinance pays for itself and starts putting over $400 back in your pocket every month.
When Should You Refinance?
Generally, experts suggest refinancing is worth considering if you can lower your interest rate by at least 0.75% to 1%. However, even a smaller reduction can be worth it if your loan balance is high or if you are switching from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage for long-term stability.