Refinancing your loan can be a strategic financial move to potentially lower your monthly payments, reduce the total interest paid over the life of the loan, or change the loan term. This calculator helps you estimate your new monthly payment after refinancing.
How the Calculation Works
The calculation for a fixed-rate mortgage payment is based on the following 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 (this is your current loan balance in the context of refinancing).
i = Your monthly interest rate. This is your new annual interest rate divided by 12. For example, if your new annual rate is 4.5%, your monthly rate (i) would be 0.045 / 12 = 0.00375.
n = The total number of payments over the loan's lifetime. This is your new loan term in years multiplied by 12. For example, a 15-year loan has 15 * 12 = 180 payments.
Factors to Consider When Refinancing
While this calculator focuses on the monthly payment, consider these additional factors:
Closing Costs: Refinancing usually involves closing costs, which can include appraisal fees, title insurance, origination fees, and more. These costs should be factored into your decision. You can often roll these costs into the new loan balance, but this will increase your P (principal amount) and potentially your monthly payment.
Total Interest Paid: A lower monthly payment might come with a longer loan term, which could mean paying more interest overall. Conversely, a shorter term can increase your monthly payment but save you significant interest in the long run.
Loan Type: This calculator assumes a fixed-rate mortgage. Adjustments may be needed for adjustable-rate mortgages (ARMs) or other loan types.
Current Financial Situation: Assess your current income stability and future financial goals before committing to a refinance.
When to Use This Calculator:
Estimating potential savings by lowering your interest rate.
Comparing different loan terms to see how they affect your monthly payment and total interest.
Understanding the impact of a new loan balance that includes closing costs.
By inputting your current loan balance, the desired new interest rate, and the new loan term, you can get a clear picture of what your monthly payments might look like after refinancing.
function calculateRefinancePayment() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value, 10);
var resultElement = document.getElementById("result").querySelector("span");
if (isNaN(currentLoanBalance) || isNaN(newInterestRate) || isNaN(loanTerm) ||
currentLoanBalance <= 0 || newInterestRate < 0 || loanTerm 0) {
monthlyPayment = currentLoanBalance * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle the case where interest rate is 0%
monthlyPayment = currentLoanBalance / numberOfPayments;
}
// Format the result to two decimal places
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
resultElement.textContent = "$" + formattedMonthlyPayment;
}