function calculateRefi() {
var balance = parseFloat(document.getElementById('loanBalance').value);
var currentPay = parseFloat(document.getElementById('currentPayment').value);
var rate = parseFloat(document.getElementById('newRate').value) / 100 / 12;
var termMonths = parseInt(document.getElementById('newTerm').value) * 12;
var costs = parseFloat(document.getElementById('closingCosts').value);
if (isNaN(balance) || isNaN(currentPay) || isNaN(rate) || isNaN(costs)) {
alert('Please enter valid numerical values.');
return;
}
// New Monthly Payment Formula: P = [r*PV] / [1 – (1+r)^-n]
var newPayment = (rate * balance) / (1 – Math.pow(1 + rate, -termMonths));
var monthlySavings = currentPay – newPayment;
var breakEvenMonths = costs / monthlySavings;
// This is a simplified total savings (Monthly Savings * Term – Costs)
// It assumes the user would have stayed in their current loan for the same duration
var totalSavings = (monthlySavings * termMonths) – costs;
document.getElementById('resNewPayment').innerText = '$' + newPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resMonthlySavings').innerText = '$' + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (monthlySavings <= 0) {
document.getElementById('resBreakEven').innerText = 'Never (Costs higher than savings)';
document.getElementById('resTotalSavings').innerText = 'No Savings';
} else {
document.getElementById('resBreakEven').innerText = Math.ceil(breakEvenMonths) + ' Months';
document.getElementById('resTotalSavings').innerText = '$' + totalSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
document.getElementById('refiResult').style.display = 'block';
}
Understanding Your Mortgage Refinance Savings
Deciding whether to refinance your home is a major financial milestone. While a lower interest rate is the primary motivator, it's essential to look at the "big picture" including closing costs and the time you intend to stay in the home.
Key Terms Explained
Remaining Loan Balance: The actual principal amount you currently owe your lender.
Monthly Savings: The difference between your current principal and interest (P&I) payment and your proposed new payment.
Break-Even Period: The number of months it takes for your monthly savings to "pay back" the upfront closing costs of the refinance.
Closing Costs: These typically range from 2% to 5% of the loan amount and include appraisal fees, title insurance, and origination fees.
Refinance Scenario Example
Imagine you have a $300,000 balance on a 30-year mortgage with a 7.5% interest rate. Your current payment is roughly $2,097. If you refinance into a new 30-year loan at 6.5% with $5,000 in closing costs:
Metric
Value
New Monthly Payment
$1,896.20
Monthly Savings
$200.80
Break-Even Point
25 Months
When Should You Refinance?
Generally, refinancing makes sense if you plan to stay in the property longer than the break-even period. If you plan to sell the house in two years but your break-even point is three years, the refinance will actually cost you money rather than save it. Additionally, consider if you are switching from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage for long-term stability, even if the monthly savings are modest.
Strategies to Maximize Savings
Shop Multiple Lenders: Interest rates and closing costs vary significantly between banks, credit unions, and online lenders.
Improve Your Credit Score: Even a 20-point boost in your credit score can qualify you for a lower interest rate tier.
Negotiate Closing Costs: Ask lenders for a "No-Closing-Cost" refinance, where they cover the fees in exchange for a slightly higher interest rate, or ask for a credit.