Estimate your potential savings by refinancing your mortgage.
Mortgage Refinance Calculator
Enter the remaining balance of your current mortgage.
Enter your current annual mortgage interest rate.
Enter the original term of your mortgage in years.
Enter the interest rate you expect to get with the new loan.
Enter the desired term for your new mortgage in years.
Enter the total closing costs and fees for the refinance.
Refinance Analysis
$0
Current Monthly P&I: $0
New Monthly P&I: $0
Total Interest (Current Loan): $0
Total Interest (New Loan): $0
Key Assumptions:
New Loan Term: 15 Years
Refinance Fees: $5,000
Formula Used: Monthly payments are calculated using the standard mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the principal loan amount, i is the monthly interest rate (annual rate / 12), and n is the number of payments (loan term in years * 12). Savings are calculated as (Total Payments Current – Total Payments New) – Refinance Fees.
Mortgage Refinance Explained
What is a Refi Mortgage Rate?
A mortgage refinance, often shortened to "refi," is the process of replacing your existing home loan with a new one. Homeowners typically refinance to take advantage of lower interest rates, reduce their monthly payments, shorten their loan term, or tap into their home's equity. The "refi mortgage rate" specifically refers to the interest rate offered on this new loan. It's a critical component because even a small change in the interest rate can significantly impact your total borrowing cost over the life of the loan.
Who Should Consider Refinancing?
Homeowners who could benefit most from refinancing include:
Those with a current mortgage rate significantly higher than current market rates.
Individuals looking to lower their monthly housing expenses to improve cash flow.
Borrowers who want to pay off their mortgage faster by shortening the loan term.
Homeowners who need to access cash for renovations, debt consolidation, or other major expenses through a cash-out refinance.
Common Misconceptions about Refinancing:
A frequent misconception is that refinancing is always beneficial. However, it involves closing costs, and if the savings don't outweigh these costs within a reasonable timeframe (your break-even point), it might not be financially prudent. Another myth is that you can only refinance with your current lender; you can shop around with multiple lenders to find the best refi mortgage rate.
Refi Mortgage Rate Calculation and Mathematical Explanation
Understanding the math behind a refi mortgage rate calculator helps in making informed decisions. The core calculation involves determining the monthly principal and interest (P&I) payment for both your current loan and the proposed new loan.
The Mortgage Payment Formula
The standard formula used to calculate the fixed monthly payment (M) for an amortizing loan is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment (Principal & Interest)
P = Principal Loan Amount (the amount borrowed)
i = Monthly Interest Rate (Annual Interest Rate / 12)
n = Total Number of Payments (Loan Term in Years * 12)
To calculate savings, we first determine the monthly P&I for the current loan and the new loan using their respective principal amounts, interest rates, and terms. The total interest paid for each loan is calculated by subtracting the principal from the total amount paid over the loan's life (M * n). The net savings from refinancing are then found by comparing the total cost of the current loan (principal + total interest) versus the total cost of the new loan (principal + total interest + refinance fees).
Variables Table:
Mortgage Refinance Variables
Variable
Meaning
Unit
Typical Range
P (Principal)
The outstanding balance of the mortgage loan.
USD ($)
$50,000 – $1,000,000+
Annual Interest Rate
The yearly rate charged on the loan.
Percent (%)
2.5% – 8.0%+
Loan Term
The duration of the loan.
Years
10 – 30 years (original); 5 – 30 years (new)
i (Monthly Interest Rate)
Annual rate divided by 12.
Decimal (e.g., 0.04 / 12)
~0.00208 – 0.00667
n (Number of Payments)
Total number of monthly payments.
Count
60 – 360
M (Monthly P&I)
Calculated monthly payment for principal and interest.
USD ($)
Varies significantly
Refinance Fees
Costs associated with closing the new loan.
USD ($)
$2,000 – $10,000+
Practical Examples of Refinancing
Let's explore a couple of scenarios to illustrate how refinancing can impact your finances.
Example 1: Lowering Monthly Payments
Scenario: Sarah has a remaining balance of $250,000 on her 30-year mortgage, taken out 5 years ago. Her current interest rate is 5.0%, and her original term was 30 years. She's offered a new 30-year refinance loan at 3.75% with $4,000 in closing costs.
Inputs:
Current Loan Balance: $250,000
Current Interest Rate: 5.0%
Current Loan Term: 30 years (original)
New Interest Rate: 3.75%
New Loan Term: 30 years
Refinance Fees: $4,000
Calculated Results (using the calculator):
Current Monthly P&I: ~$1,342.05
New Monthly P&I: ~$1,160.58
Estimated Monthly Savings: ~$181.47
Total Interest Paid (Current Loan): ~$153,138 (over remaining 25 years)
Total Interest Paid (New Loan): ~$117,790 (over 30 years)
Estimated Total Interest Savings: ~$35,348 (over the life of the loan, ignoring fees)
Net Savings (after fees): ~$31,348
Interpretation: Sarah can significantly reduce her monthly payment by over $180. While she extends her loan term by 5 years, the lower refi mortgage rate allows her to save over $31,000 in interest costs in the long run. This is a good option if she needs more monthly cash flow.
Example 2: Shortening Loan Term & Saving Interest
Scenario: John has $180,000 remaining on his mortgage with a 4.8% interest rate and 20 years left on his original 30-year term. He qualifies for a new 15-year refinance loan at 3.5% with $5,000 in closing costs.
Inputs:
Current Loan Balance: $180,000
Current Interest Rate: 4.8%
Current Loan Term: 30 years (original)
New Interest Rate: 3.5%
New Loan Term: 15 years
Refinance Fees: $5,000
Calculated Results (using the calculator):
Current Monthly P&I: ~$1,150.15
New Monthly P&I: ~$1,343.77
Estimated Monthly Payment Increase: ~$193.62
Total Interest Paid (Current Loan): ~$92,036 (over remaining 20 years)
Total Interest Paid (New Loan): ~$61,879 (over 15 years)
Estimated Total Interest Savings: ~$30,157 (over the life of the loan, ignoring fees)
Net Savings (after fees): ~$25,157
Interpretation: John's monthly payment will increase by about $194. However, by refinancing into a shorter term and securing a lower refi mortgage rate, he will pay off his mortgage 5 years sooner and save over $25,000 in interest. This strategy is ideal for homeowners who can afford a slightly higher monthly payment and prioritize paying off their home faster.
How to Use This Refi Mortgage Rate Calculator
Our Refi Mortgage Rate Calculator is designed for simplicity and clarity. Follow these steps to get your personalized refinance estimate:
Enter Current Loan Details: Input your Current Loan Balance, Current Interest Rate, and the original Current Loan Term (in years). This helps establish your baseline.
Enter New Loan Details: Provide the expected New Interest Rate you've been quoted or are targeting, and the desired New Loan Term (in years).
Input Refinance Fees: Enter the total Refinance Fees (closing costs, points, etc.) associated with the new loan.
Calculate Savings: Click the "Calculate Savings" button. The calculator will instantly update.
Reading the Results:
Primary Result (Estimated Savings): This is the headline number showing your projected net savings after accounting for refinance fees. A positive number indicates potential savings.
Intermediate Values:
Current Monthly P&I: Your current principal and interest payment.
New Monthly P&I: The estimated principal and interest payment for the new loan.
Total Interest Paid (Current/New): The total interest you'd pay over the life of each respective loan.
Key Assumptions: Confirms the loan terms and fees used in the calculation.
Formula Explanation: Provides transparency on how the calculations were performed.
Decision-Making Guidance:
Use the results to compare the potential monthly payment difference and the long-term interest savings. Consider your financial goals: if immediate cash flow is key, prioritize lower monthly payments. If long-term wealth building and debt freedom are priorities, focus on total interest saved and the payoff timeline. Always remember that the calculator provides an estimate; actual rates and fees may vary. It's crucial to get official Loan Estimates from lenders.
Key Factors Affecting Refinance Results
Several elements influence the outcome of a mortgage refinance. Understanding these can help you strategize and negotiate better terms:
Current vs. New Interest Rates: This is the most significant factor. A substantial drop in market rates compared to your current rate is the primary driver for refinancing to save money. The larger the difference, the greater the potential savings.
Loan Term: Choosing a shorter new loan term (e.g., 15 vs. 30 years) usually results in higher monthly payments but significantly less total interest paid over time. Conversely, extending the term can lower monthly payments but increase overall interest costs.
Refinance Fees (Closing Costs): These costs (appraisal, title insurance, origination fees, etc.) reduce your net savings. Calculate your "break-even point" – the number of months it takes for your monthly savings to recoup the refinance fees. If you plan to sell or move before reaching this point, refinancing might not be worthwhile.
Credit Score: A higher credit score typically qualifies you for lower refi mortgage rates. Lenders view borrowers with excellent credit as less risky. Improving your credit score before applying can lead to substantial savings.
Loan-to-Value (LTV) Ratio: This is the ratio of your loan balance to your home's appraised value. Lenders often offer better rates to borrowers with lower LTV ratios (meaning you have more equity). Significant home appreciation or paying down your principal can improve your LTV.
Market Conditions and Economic Outlook: Broader economic factors, including inflation, Federal Reserve policy, and overall mortgage market trends, influence the available refi mortgage rates. Locking in a rate during a period of falling rates is generally advantageous.
Your Financial Goals: Are you aiming to lower monthly payments for budgeting relief, pay off the loan faster, or extract equity (cash-out refinance)? Your primary objective will dictate whether a particular refi option is "good" for you, even if the numbers look different.
Frequently Asked Questions (FAQ)
Q1: How soon can I refinance my mortgage?
Generally, lenders prefer you to have made at least 6-12 months of payments on your current mortgage and built some equity. Some loan programs have specific seasoning requirements.
Q2: What is the break-even point for refinancing?
The break-even point is the number of months it takes for your monthly savings from refinancing to equal the total closing costs. Calculated as: Total Refinance Fees / Monthly Savings. You should plan to stay in your home longer than this point for the refinance to be profitable.
Q3: Can refinancing increase my monthly payment?
Yes, refinancing can increase your monthly payment if you choose a shorter loan term (like 15 years instead of 30) or if the new interest rate is higher than your current one. The goal is usually to save money overall or achieve specific financial objectives.
Q4: What are the different types of refinances?
The main types are Rate-and-Term Refinance (to get a lower rate or change term) and Cash-Out Refinance (to borrow against your home equity).
Q5: How do refinance fees impact my savings?
Refinance fees are subtracted from your total potential interest savings. High fees can negate the benefits of a lower refi mortgage rate, especially if you don't stay in the home long enough to recoup them.
Q6: Should I refinance if rates have only slightly decreased?
It depends. If the rate drop is minimal, refinancing might only be worthwhile if the closing costs are very low or if you're also shortening your loan term significantly. Always calculate your break-even point.
Q7: What is mortgage rate lock?
A mortgage rate lock is a guarantee from a lender to hold a specific interest rate for you for a set period (e.g., 30-60 days) while your refinance application is processed. This protects you if rates rise during the process.
Q8: Can I refinance if my home value has decreased?
It can be more challenging. A decrease in home value increases your Loan-to-Value (LTV) ratio, which might prevent you from qualifying for the best refi mortgage rates or even refinancing at all, especially if you need a cash-out refinance.