Total Savings Over New Loan Term (Excluding Closing Costs)
N/A
Break-Even Point (Months)
Understanding Mortgage Refinancing and Savings
Mortgage refinancing is the process of replacing your existing home loan with a new one. Homeowners often refinance to take advantage of lower interest rates, reduce their monthly payments, shorten their loan term, or cash out equity. This calculator helps you estimate the potential financial benefits of refinancing your mortgage.
How the Calculator Works:
The calculator compares your current mortgage's payment and total interest paid with a hypothetical new mortgage based on your input refinance terms.
Current Mortgage Payment Calculation: It uses the standard mortgage payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]), where P is the principal loan amount, i is the monthly interest rate (annual rate / 12), and n is the total number of payments (loan term in years * 12). This is calculated for your current loan.
New Mortgage Payment Calculation: The same formula is applied to calculate the estimated monthly payment for the new, refinanced loan, incorporating the new interest rate and loan term.
Monthly Savings: The difference between your current estimated monthly payment and the new estimated monthly payment.
Total Savings: The sum of the monthly savings multiplied by the total number of payments in the new loan term. This represents the cumulative savings over the life of the new loan.
Break-Even Point: This is a crucial metric. It calculates how many months it will take for the accumulated monthly savings to offset the estimated closing costs associated with the refinance. If the break-even point is shorter than the expected time you plan to stay in the home, refinancing is likely beneficial.
Key Inputs Explained:
Current Mortgage Balance: The outstanding amount you owe on your current mortgage.
Current Interest Rate: The annual interest rate of your existing mortgage.
Current Loan Term (Years): The remaining duration of your current mortgage in years.
New Interest Rate (%): The annual interest rate you expect to get on the new refinance loan.
New Loan Term (Years): The duration of the new mortgage you plan to take out. Choosing a shorter term can lead to more interest savings but higher monthly payments.
Estimated Closing Costs: These are fees associated with obtaining a new mortgage, such as appraisal fees, title insurance, origination fees, etc. It's important to get an accurate estimate from your lender.
When to Consider Refinancing:
Falling Interest Rates: If market interest rates have dropped significantly since you got your current mortgage, refinancing can lower your interest rate and monthly payments.
Improving Credit Score: A higher credit score can qualify you for better interest rates.
Need to Lower Monthly Payments: Refinancing into a longer loan term or a lower interest rate can reduce your monthly housing expense.
Consolidating Debt or Cashing Out Equity: Some refinance options allow you to borrow more than your current balance to pay for other expenses or invest, though this increases your loan amount and total interest paid.
Remember that refinancing involves costs. Always compare the total savings over the life of the loan against the upfront closing costs to ensure it's a financially sound decision for your situation.
function calculateMonthlyPayment(principal, annualRate, years) {
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = years * 12;
if (monthlyRate === 0) {
return principal / numberOfPayments;
}
var payment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
return isNaN(payment) ? 0 : payment;
}
function calculateTotalInterestPaid(principal, monthlyPayment, years) {
var numberOfPayments = years * 12;
var totalPaid = monthlyPayment * numberOfPayments;
var totalInterest = totalPaid – principal;
return totalInterest < 0 ? 0 : totalInterest;
}
function calculateRefinance() {
var currentLoanAmount = parseFloat(document.getElementById("currentLoanAmount").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTerm = parseFloat(document.getElementById("currentLoanTerm").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseFloat(document.getElementById("newLoanTerm").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
var monthlySavingsDisplay = document.getElementById("monthlySavings");
var totalSavingsDisplay = document.getElementById("totalSavings");
var breakEvenDisplay = document.getElementById("breakEven");
// Clear previous results
monthlySavingsDisplay.textContent = "$0.00";
totalSavingsDisplay.textContent = "$0.00";
breakEvenDisplay.textContent = "N/A";
// Input validation
if (isNaN(currentLoanAmount) || currentLoanAmount <= 0 ||
isNaN(currentInterestRate) || currentInterestRate < 0 ||
isNaN(currentLoanTerm) || currentLoanTerm <= 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(newLoanTerm) || newLoanTerm <= 0 ||
isNaN(closingCosts) || closingCosts 0) {
breakEvenMonths = closingCosts / monthlySavings;
} else {
breakEvenMonths = Infinity; // Cannot break even if no monthly savings
}
// Format currency and display results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
monthlySavingsDisplay.textContent = formatter.format(monthlySavings);
totalSavingsDisplay.textContent = formatter.format(totalSavings);
breakEvenDisplay.textContent = breakEvenMonths === Infinity ? "Never" : Math.round(breakEvenMonths) + " months";
}