Mortgage Refinance Savings Calculator
Determine if refinancing your home loan will save you money and find your break-even point.
Is It the Right Time to 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 the prospect of a lower monthly payment is enticing, it is essential to calculate the total costs involved, including closing fees, to ensure the move makes financial sense.
How This Refinance Calculator Works
Our calculator compares your existing monthly Principal and Interest (P&I) payment against a projected new payment based on current market rates. To get an accurate result, you will need:
- Current Loan Balance: The actual amount you still owe your lender.
- Current Monthly Payment: Only the portion going toward principal and interest (exclude taxes and insurance).
- New Interest Rate: The rate quoted by your potential new lender.
- Closing Costs: Fees for appraisal, title insurance, and origination (usually 2% to 5% of the loan amount).
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 $4,000 and you save $200 per month, your break-even point is 20 months. If you plan to sell the home before reaching that point, refinancing may actually cost you money.
Example Calculation
Imagine you owe $250,000 at a 6.5% interest rate. Your current P&I payment is roughly $1,580. If you refinance into a new 30-year loan at 4.5% with $5,000 in closing costs:
- Your new monthly payment would be approximately $1,266.
- You would save $314 per month.
- Your break-even point would be approximately 16 months.
In this scenario, if you plan to stay in the home for more than 1.5 years, the refinance is highly beneficial.