Mortgage Refinance Savings Calculator
New Estimated Monthly Payment:
$0.00
Monthly Savings:
$0.00
Break-Even Point:
0 months
Total Interest Paid (New Loan):
$0.00
Should You Refinance Your Mortgage?
Refinancing a mortgage involves replacing your current home loan with a new one, typically to take advantage of lower interest rates or to change the loan term. While a lower monthly payment is attractive, it is vital to calculate the "break-even point"—the moment where your monthly savings finally outweigh the upfront closing costs of the new loan.
How to Use This Calculator
To get an accurate estimate, follow these steps:
- Remaining Balance: Check your latest mortgage statement for the exact principal balance.
- Current Payment: Only include the Principal and Interest (P&I) portion. Do not include taxes or insurance (escrow), as those will likely remain similar regardless of the loan.
- Closing Costs: Refinancing usually costs between 2% and 5% of the loan amount. Include application fees, appraisal fees, and title insurance.
Understanding the Break-Even Point
The break-even point is the most critical metric. For example, if your refinancing costs are $6,000 and you save $200 per month, it will take you 30 months (2.5 years) to recover your costs. If you plan to sell your home within two years, refinancing might actually cost you money rather than saving it.
The Math Behind the Calculation
This calculator uses the standard amortization formula to determine the new monthly payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where M is the monthly payment, P is the principal balance, i is the monthly interest rate (annual rate divided by 12), and n is the total number of months in the loan term.