Mortgage Refinance Calculator
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Mortgage Refinance Calculator
Refinance Impact
Your potential monthly savings and total interest savings will appear here.
Understanding Mortgage Refinancing
Refinancing your mortgage means replacing your existing home loan with a new one. People refinance for various reasons, primarily to secure a lower interest rate, change their loan term, or tap into their home's equity. This calculator focuses on the potential savings from obtaining a lower interest rate.
How Does Mortgage Refinancing Work?
When you refinance, you essentially pay off your old mortgage with the proceeds from a new mortgage. The new loan will have its own interest rate, loan term, and monthly payments. The decision to refinance often hinges on whether the savings from a lower interest rate outweigh the costs associated with the refinance transaction (closing costs).
The Math Behind the Savings
The core of this calculator relies on the standard mortgage payment formula (Amortization Formula):
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (principal and interest)P = The principal loan amount (your current loan balance)i = Your monthly interest rate (annual rate divided by 12)n = The total number of payments over the loan's lifetime (loan term in months)
The calculator first determines your current monthly payment using your existing loan details. Then, it calculates what your monthly payment *would be* with the new, proposed interest rate, keeping the loan balance and term the same (or adjusted based on the user input). The difference between these two monthly payments represents your potential monthly savings.
Total interest paid under the current loan and the potential new loan is also calculated by summing up the interest paid over the entire loan term. The difference between these total interest amounts shows the long-term interest savings.
The calculator then compares the potential monthly savings against the closing costs. If the total savings over a certain period (often called the "break-even point") are greater than the closing costs, refinancing may be a financially sound decision.
When Should You Consider Refinancing?
- Lower Interest Rates: If current market rates are significantly lower than your existing mortgage rate.
- Improve Credit Score: A higher credit score may qualify you for better rates.
- Shorten Loan Term: To pay off your mortgage faster, though this usually increases monthly payments.
- Convert Loan Type: Moving from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability.
- Cash-Out Refinance: To borrow against your home equity for major expenses like renovations or debt consolidation.
Important Considerations:
- Closing Costs: These can include appraisal fees, title insurance, origination fees, etc. Ensure your savings will recoup these costs.
- Loan Term: Be mindful of how a new loan term might affect your overall interest paid, even with a lower rate.
- Credit Score: Your credit score will be a major factor in qualifying for refinancing and securing a good rate.
- Market Conditions: Interest rate trends can influence whether it's a good time to refinance.
Use this calculator as a tool to estimate potential savings. Consulting with a mortgage professional is recommended for personalized advice.
function calculateMonthlyPayment(principal, annualRate, termMonths) {
var monthlyRate = annualRate / 100 / 12;
var n = termMonths;
var P = principal;
if (monthlyRate === 0) {
return P / n;
}
var M = P * (monthlyRate * Math.pow(1 + monthlyRate, n)) / (Math.pow(1 + monthlyRate, n) – 1);
return isNaN(M) ? 0 : M;
}
function calculateTotalInterest(principal, monthlyPayment, termMonths) {
var totalPaid = monthlyPayment * termMonths;
var totalInterest = totalPaid – principal;
return isNaN(totalInterest) ? 0 : totalInterest;
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var refinanceClosingCosts = parseFloat(document.getElementById("refinanceClosingCosts").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = 'Your potential monthly savings and total interest savings will appear here.'; // Clear previous results
// Input validation
if (isNaN(currentLoanBalance) || currentLoanBalance <= 0 ||
isNaN(currentInterestRate) || currentInterestRate < 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(loanTermMonths) || loanTermMonths <= 0 ||
isNaN(refinanceClosingCosts) || refinanceClosingCosts = currentInterestRate) {
resultDiv.innerHTML = 'The new interest rate is not lower than the current rate. Refinancing may not offer savings in this scenario.';
// Continue calculation to show no savings, but alert user
}
// Calculate current monthly payment and total interest
var currentMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, currentInterestRate, loanTermMonths);
var currentTotalInterest = calculateTotalInterest(currentLoanBalance, currentMonthlyPayment, loanTermMonths);
// Calculate new potential monthly payment and total interest
var newMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, newInterestRate, loanTermMonths);
var newTotalInterest = calculateTotalInterest(currentLoanBalance, newMonthlyPayment, loanTermMonths);
// Calculate savings
var monthlySavings = currentMonthlyPayment – newMonthlyPayment;
var totalInterestSavings = currentTotalInterest – newTotalInterest;
// Ensure savings are not negative due to rate increase or floating point issues
monthlySavings = Math.max(0, monthlySavings);
totalInterestSavings = Math.max(0, totalInterestSavings);
var breakEvenMonths = 0;
if (monthlySavings > 0) {
breakEvenMonths = refinanceClosingCosts / monthlySavings;
} else {
breakEvenMonths = Infinity; // Cannot break even if no monthly savings
}
var formattedMonthlySavings = monthlySavings.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedTotalInterestSavings = totalInterestSavings.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedClosingCosts = refinanceClosingCosts.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedBreakEven = breakEvenMonths === Infinity ? "N/A" : breakEvenMonths.toLocaleString(undefined, { minimumFractionDigits: 1, maximumFractionDigits: 1 }) + " months";
resultDiv.innerHTML = `
Current Estimated Monthly Payment:
$${currentMonthlyPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}
New Estimated Monthly Payment:
$${newMonthlyPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}
Estimated Monthly Savings:
0 ? 'green' : 'red'};">$${formattedMonthlySavings}
Estimated Total Interest Savings:
0 ? 'green' : 'red'};">$${formattedTotalInterestSavings}
Estimated Closing Costs:
$${formattedClosingCosts}
Break-Even Point:
${formattedBreakEven} (Months to recoup closing costs)
0 && breakEvenMonths !== Infinity ? '#e0f2f7' : '#fff3e0'}; border-left: 5px solid ${monthlySavings > 0 && breakEvenMonths !== Infinity ? 'var(–success-green)' : '#ffa000'};">
Potential Annual Savings: 0 ? 'var(–success-green)' : 'orange'};">$${(monthlySavings * 12).toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 })}
`;
}