Calculate your monthly savings and find your break-even point.
Refinance Results
Current Monthly Payment:$0.00
New Monthly Payment:$0.00
Monthly Savings:$0.00
Break-Even Point:0 Months
Total Savings over New Term:$0.00
How to Calculate Mortgage Refinance Savings
Deciding whether to refinance your mortgage is a significant financial move. The primary goal is usually to lower your monthly payments or reduce the total interest paid over the life of the loan. This calculator helps you determine if the upfront closing costs are worth the long-term benefit.
Understanding the Break-Even Point
The Break-Even Point is the most critical metric in a refinance analysis. It represents the number of months it will take for your monthly savings to cover the upfront closing costs of the new loan. For example, if your closing costs are $5,000 and you save $200 per month, your break-even point is 25 months. If you plan to stay in the home longer than 25 months, refinancing typically makes financial sense.
Key Factors to Consider
Interest Rate Differential: Traditionally, a drop of 0.75% to 1% is the benchmark for refinancing, but even smaller drops can be beneficial for large loan balances.
Loan Term: If you refinance a 25-year remaining term into a new 30-year term, your monthly payment will drop significantly, but you may pay more in total interest over time.
Closing Costs: These typically range from 2% to 5% of the loan amount and include appraisal fees, title insurance, and origination fees.
Realistic Refinance Example
Imagine you have a current balance of $350,000 at 7% interest with 20 years left. Your monthly principal and interest payment is approximately $2,713. If you refinance into a new 5.5% interest loan for 20 years with $6,000 in closing costs:
New Monthly Payment: $2,407
Monthly Savings: $306
Break-Even Point: 19.6 Months
In this scenario, after less than two years, the homeowner has fully "paid back" the closing costs through monthly savings and begins to realize true profit from the lower rate.