Estimate your potential savings by refinancing your existing loan.
Estimated Total Savings
This is an estimate. Actual savings may vary based on loan terms and lender fees.
Understanding Refinancing and How This Calculator Works
Refinancing your loan means replacing your existing loan with a new one, often to secure a lower interest rate, change the loan term, or access equity. The primary goal for most individuals considering refinancing is to reduce their monthly payments and/or the total interest paid over the life of the loan.
Key Concepts:
Current Loan Balance: The outstanding amount you currently owe on your loan.
Current Interest Rate: The annual interest rate on your existing loan.
New Refinance Interest Rate: The proposed annual interest rate on the new loan you are considering.
Remaining Loan Term: The number of months left until your current loan is fully paid off.
Estimated Refinance Fees: The upfront costs associated with obtaining the new loan (e.g., appraisal fees, title insurance, origination fees).
How the Calculator Works:
This calculator estimates your potential savings by comparing the total cost of your current loan (if you continue with it) against the total cost of a refinanced loan. It calculates:
Monthly Payment for Current Loan: Using the standard loan 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 (remaining term in months).
Monthly Payment for New Loan: Calculated using the same formula with the new interest rate and the same remaining term.
Total Interest Paid on Current Loan: The total monthly payments multiplied by the remaining term, minus the current loan balance.
Total Interest Paid on New Loan: The total monthly payments for the new loan multiplied by the remaining term, minus the current loan balance.
Total Cost of New Loan: The sum of the new loan's principal, total interest, and refinance fees.
Total Savings: The difference between the total interest paid on the current loan and the total interest paid on the new loan, plus any refinance fees. This represents the net financial benefit.
Monthly Savings: The difference between the current monthly payment and the new monthly payment.
Break-Even Point: This is estimated by dividing the refinance fees by the monthly savings. It tells you how many months it will take for the monthly payment reduction to offset the initial costs of refinancing.
When to Consider Refinancing:
Lower Interest Rates: If market interest rates have dropped significantly since you took out your original loan, you might qualify for a lower rate.
Improved Credit Score: If your credit score has improved, you may be eligible for better interest rates.
Changing Financial Goals: You might want to shorten your loan term to pay it off faster or extend it to lower monthly payments.
Accessing Equity: Cash-out refinancing allows you to borrow more than your current balance and use the difference for other needs, though this increases your loan amount and total interest paid.
It's crucial to compare the new loan's interest rate, fees, and terms against your current loan. This calculator provides a starting point to assess the potential financial impact of refinancing.
function calculateMonthlyPayment(principal, annualRate, termInMonths) {
if (principal <= 0 || annualRate < 0 || termInMonths = currentRate) {
resultDiv.style.display = 'block';
resultValueDiv.textContent = "No Savings Expected";
resultValueDiv.style.color = "#ffc107";
monthlySavingsP.textContent = "New rate is not lower than the current rate.";
breakEvenP.textContent = "";
return;
}
var currentMonthlyPayment = calculateMonthlyPayment(currentBalance, currentRate, remainingTerm);
var newMonthlyPayment = calculateMonthlyPayment(currentBalance, newRate, remainingTerm);
var monthlySavings = currentMonthlyPayment – newMonthlyPayment;
var totalSavingsOnInterest = (currentMonthlyPayment * remainingTerm) – (newMonthlyPayment * remainingTerm);
var netSavings = totalSavingsOnInterest – refinanceFees;
var breakEvenMonths = 0;
if (monthlySavings > 0) {
breakEvenMonths = refinanceFees / monthlySavings;
} else {
breakEvenMonths = Infinity; // Cannot break even if no monthly savings
}
resultDiv.style.display = 'block';
resultValueDiv.textContent = "$" + netSavings.toFixed(2);
resultValueDiv.style.color = "#28a745";
monthlySavingsP.textContent = "Estimated Monthly Savings: $" + monthlySavings.toFixed(2);
if (breakEvenMonths === Infinity) {
breakEvenP.textContent = "Break-Even Point: Not applicable (no monthly savings).";
} else {
breakEvenP.textContent = "Estimated Break-Even Point: " + breakEvenMonths.toFixed(2) + " months";
}
}