Refinancing a loan involves replacing an existing loan with a new one, often to secure a lower interest rate, reduce monthly payments, change the loan term, or access cash equity. This calculator helps you estimate your new potential monthly payment after refinancing.
How the Calculator Works:
The core of the calculation is determining the new loan's principal amount, which includes the current remaining balance plus any financed closing costs. Then, it applies the standard mortgage payment formula to this new principal, using the new interest rate and loan term.
1. New Loan Principal:
The total amount you'll borrow under the new loan is the sum of your Current Remaining Balance and the Estimated Closing Costs if you choose to finance them.
New Principal = Current Remaining Balance + Closing Costs
2. Monthly Interest Rate:
The annual interest rate (provided as a percentage) is converted into a monthly rate by dividing it by 12.
The loan term in years is converted into the total number of monthly payments.
Total Payments = New Loan Term (Years) * 12
4. The Monthly Payment Formula (Amortization Formula):
The calculator uses the standard formula for calculating the fixed monthly payment (M) of an amortizing loan:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = New Loan Principal
i = Monthly Interest Rate
n = Total Number of Payments
When to Use This Calculator:
Lowering Monthly Payments: If current interest rates are significantly lower than your existing loan, refinancing might reduce your monthly outlay.
Shortening Loan Term: Refinancing to a shorter term (e.g., from a 30-year to a 15-year mortgage) can help you pay off your loan faster and save on total interest, though monthly payments might increase.
Changing Loan Type: Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability.
Cash-Out Refinance: Accessing your home's equity for renovations, debt consolidation, or other large expenses. Note that this calculator focuses on the payment, not the total interest savings or cash-out amount.
Disclaimer: This calculator provides an estimate for informational purposes only. Actual loan terms, rates, closing costs, and your final monthly payment may vary. Consult with a mortgage lender for precise figures and personalized advice.
function calculateRefiPayment() {
var remainingBalance = parseFloat(document.getElementById("remainingBalance").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseInt(document.getElementById("newLoanTerm").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
var originalLoanAmount = parseFloat(document.getElementById("originalLoanAmount").value); // Included for context in explanation if needed, but not direct for payment calculation
// Validate inputs
if (isNaN(remainingBalance) || remainingBalance < 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(newLoanTerm) || newLoanTerm < 1 ||
isNaN(closingCosts) || closingCosts 0 && monthlyInterestRate > 0) {
// Standard Amortization Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
var numerator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
var denominator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
monthlyPayment = newPrincipal * (numerator / denominator);
} else if (newPrincipal > 0 && monthlyInterestRate === 0) {
// Handle zero interest rate scenario
monthlyPayment = newPrincipal / numberOfPayments;
} else if (newPrincipal === 0) {
monthlyPayment = 0; // No loan, no payment
}
// Format the result to two decimal places and add currency symbol
var formattedPayment = "$" + monthlyPayment.toFixed(2);
document.getElementById("result-value").innerText = formattedPayment;
}