Refinancing a mortgage can be a powerful financial move, but it's not always the right choice for every homeowner. This Mortgage Refinance Savings Calculator helps you determine if the long-term interest savings outweigh the upfront closing costs.
Understanding the Break-Even Point
The "Break-Even Point" is the most critical metric in refinancing. It represents the number of months it will take for your monthly savings to "pay back" the closing costs of the new loan. If you plan to sell your home or pay off your mortgage before reaching this point, refinancing may actually cost you more money than you save.
Key Factors to Consider
Interest Rate Differential: Traditionally, experts suggest a drop of at least 0.75% to 1% to make refinancing worth the costs.
Loan Term Extension: If you refinance a loan that has 20 years left into a new 30-year loan, your monthly payment will drop significantly, but you may end up paying more in total interest over the long run.
Closing Costs: These usually range from 2% to 5% of the loan amount. Ensure these are accounted for in your "Refinancing Costs" input.
Real-World Example
Imagine you owe $300,000 on a mortgage with a 6.5% interest rate and 25 years remaining. Your current payment is roughly $2,025. By refinancing into a 4.5% rate for 30 years, your new payment would be approximately $1,520.
While you save $505 per month, you must look at the costs. If the closing costs are $5,000, your break-even point is about 10 months. If you stay in the home longer than 10 months, you are officially saving money!
function calculateRefiSavings() {
var balance = parseFloat(document.getElementById('refi_balance').value);
var costs = parseFloat(document.getElementById('refi_costs').value);
var currentRate = parseFloat(document.getElementById('refi_current_rate').value) / 100 / 12;
var newRate = parseFloat(document.getElementById('refi_new_rate').value) / 100 / 12;
var currentTermMonths = parseFloat(document.getElementById('refi_current_term').value) * 12;
var newTermMonths = parseFloat(document.getElementById('refi_new_term').value) * 12;
if (isNaN(balance) || isNaN(currentRate) || isNaN(newRate) || isNaN(currentTermMonths) || isNaN(newTermMonths)) {
alert("Please enter valid numeric values for all fields.");
return;
}
// Current Payment Calculation
var currentPayment = balance * (currentRate * Math.pow(1 + currentRate, currentTermMonths)) / (Math.pow(1 + currentRate, currentTermMonths) – 1);
// New Payment Calculation
var newPayment = balance * (newRate * Math.pow(1 + newRate, newTermMonths)) / (Math.pow(1 + newRate, newTermMonths) – 1);
var monthlySavings = currentPayment – newPayment;
// Total Interest Current (Remaining)
var totalInterestCurrent = (currentPayment * currentTermMonths) – balance;
// Total Interest New
var totalInterestNew = (newPayment * newTermMonths) – balance;
var totalInterestSaved = totalInterestCurrent – totalInterestNew;
var breakEvenMonths = monthlySavings > 0 ? (costs / monthlySavings) : 0;
// Display Results
document.getElementById('refi_results_box').style.display = 'block';
document.getElementById('res_current_pay').innerText = '$' + currentPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_new_pay').innerText = '$' + newPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_monthly_savings').innerText = '$' + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_interest_savings').innerText = '$' + totalInterestSaved.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (monthlySavings <= 0) {
document.getElementById('res_break_even').innerText = "Never (No Monthly Savings)";
document.getElementById('res_break_even').style.color = "#e74c3c";
} else {
document.getElementById('res_break_even').innerText = Math.ceil(breakEvenMonths) + " Months (" + (breakEvenMonths / 12).toFixed(1) + " Years)";
document.getElementById('res_break_even').style.color = "#27ae60";
}
}