Estimate potential savings or costs when refinancing your existing second mortgage.
Estimated Savings/Cost
(Based on total interest paid over the new loan term, including closing costs.)
Understanding Your 2nd Mortgage Refinance
Refinancing a second mortgage, often called a home equity loan or HELOC, can be a strategic financial move. It involves replacing your existing second mortgage with a new one, potentially with different terms, interest rates, and loan amounts. The primary goals are usually to lower your monthly payments, reduce the total interest paid over the life of the loan, or to access your home equity for other needs. This calculator helps you compare the financial implications of refinancing your current second mortgage against keeping it as is.
How the Calculator Works
The calculator compares the total interest paid on your current second mortgage over its remaining term with the total interest paid on a new, refinanced second mortgage over its new term, factoring in any closing costs associated with the refinance.
Key Calculations:
Monthly Payment Calculation (Amortization): The calculator uses the standard loan amortization formula to determine the monthly payment for both the current and the proposed new loan. The formula is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount (Current 2nd Mortgage Balance)
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Remaining Term in Years * 12)
Total Interest Paid (Current Loan): Calculated by multiplying the monthly payment by the total number of payments (n) and subtracting the principal loan amount (P).
Total Interest Paid (New Loan): Calculated similarly for the new loan terms (New Rate, New Term).
Total Cost of New Loan: Sum of the Total Interest Paid on the new loan plus the Refinance Closing Costs.
Net Savings/Cost: The difference between the Total Interest Paid on the current loan and the Total Cost of the new loan. A positive number indicates savings; a negative number indicates an increased cost.
When to Consider Refinancing Your 2nd Mortgage:
Lower Interest Rates Available: If market rates have dropped significantly since you took out your current second mortgage, refinancing could secure a lower rate, reducing your monthly payments and overall interest paid.
Shorter Loan Term: If you can afford a slightly higher monthly payment, refinancing into a shorter term can help you pay off the debt faster and save significantly on interest.
Consolidating Debt: You might refinance your second mortgage to take cash out to consolidate other higher-interest debts, potentially simplifying payments and reducing overall interest.
Improving Cash Flow: If your financial situation has changed and you need to lower your monthly obligations, refinancing into a longer term (while being mindful of total interest) or a lower rate can help.
Important Considerations:
Closing Costs: Always factor in all closing costs associated with the refinance. These can include appraisal fees, title insurance, origination fees, etc. Ensure the interest savings outweigh these upfront costs.
Impact on Primary Mortgage: Understand how refinancing a second mortgage might affect your primary mortgage or your overall home equity.
Credit Score: Your credit score will influence the interest rates you can qualify for.
Loan Purpose: Be clear about why you are refinancing. Is it for savings, cash-out, or debt consolidation?
Use this calculator as a guide, but always consult with a qualified financial advisor or mortgage professional before making any decisions regarding refinancing.
function calculateMonthlyPayment(principal, annualRate, years) {
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = years * 12;
if (monthlyRate === 0) {
return principal / numberOfPayments;
}
var numerator = principal * monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments);
var denominator = Math.pow(1 + monthlyRate, numberOfPayments) – 1;
if (denominator === 0) return Infinity; // Avoid division by zero if something is wrong
return numerator / denominator;
}
function calculateTotalInterest(principal, annualRate, years) {
var monthlyPayment = calculateMonthlyPayment(principal, annualRate, years);
if (!isFinite(monthlyPayment)) return Infinity;
var totalPayments = monthlyPayment * years * 12;
var totalInterest = totalPayments – principal;
return totalInterest;
}
function calculateRefinance() {
var currentBalance = parseFloat(document.getElementById("currentSecondMortgageBalance").value);
var currentRate = parseFloat(document.getElementById("currentSecondMortgageInterestRate").value);
var currentTerm = parseFloat(document.getElementById("currentSecondMortgageRemainingTerm").value);
var newRate = parseFloat(document.getElementById("newSecondMortgageRate").value);
var newTerm = parseFloat(document.getElementById("newSecondMortgageTerm").value);
var closingCosts = parseFloat(document.getElementById("refinanceClosingCosts").value);
var resultDiv = document.getElementById("result");
var finalValueDiv = resultDiv.querySelector('.final-value');
// Input validation
if (isNaN(currentBalance) || currentBalance <= 0 ||
isNaN(currentRate) || currentRate < 0 ||
isNaN(currentTerm) || currentTerm <= 0 ||
isNaN(newRate) || newRate < 0 ||
isNaN(newTerm) || newTerm <= 0 ||
isNaN(closingCosts) || closingCosts 0) {
explanationText = "You could save approximately " + formattedSavings + " over the life of the loan.";
finalValueDiv.textContent = formattedSavings;
resultDiv.style.backgroundColor = "#e6f7ff";
resultDiv.style.borderColor = "#91d5ff";
resultDiv.querySelector('h3').textContent = "Estimated Savings";
} else if (netSavings < 0) {
explanationText = "Refinancing could cost you approximately " + Math.abs(netSavings).toLocaleString('en-US', { style: 'currency', currency: 'USD' }) + " more.";
finalValueDiv.textContent = Math.abs(netSavings).toLocaleString('en-US', { style: 'currency', currency: 'USD' });
resultDiv.style.backgroundColor = "#fff0f0";
resultDiv.style.borderColor = "#ffccc7";
resultDiv.querySelector('h3').textContent = "Estimated Additional Cost";
} else {
explanationText = "Refinancing your second mortgage appears to result in no net savings or additional cost.";
finalValueDiv.textContent = "$0.00";
resultDiv.style.backgroundColor = "#f0fff0";
resultDiv.style.borderColor = "#ccffcc";
resultDiv.querySelector('h3').textContent = "Break Even";
}
resultDiv.style.display = "block";
// Clear previous specific message if any
var specificMessageElement = resultDiv.querySelector('.specific-message');
if (specificMessageElement) {
specificMessageElement.remove();
}
// Add the new explanation text
var newMessageElement = document.createElement('p');
newMessageElement.textContent = explanationText;
newMessageElement.style.fontSize = "0.9em";
newMessageElement.style.marginTop = "10px";
newMessageElement.className = "specific-message";
resultDiv.appendChild(newMessageElement);
}