Mortgage Refinance Savings Calculator
Current Monthly Payment:
$0.00
New Monthly Payment:
$0.00
Monthly Savings:
$0.00
Total Interest Savings:
$0.00
Break-Even Point:
0 months
How to Use the Mortgage Refinance Savings Calculator
Deciding whether to refinance your home is a major financial move. This calculator helps you determine if the long-term interest savings and monthly cash flow improvements outweigh the upfront closing costs of a new loan.
Realistic Example:
If you have a $300,000 balance at 6.5% with 25 years left, your payment is roughly $2,025. If you refinance to a new 30-year loan at 5.0% with $5,000 in closing costs, your new payment drops to $1,610. That is a monthly savings of $415. You would "break even" on the closing costs in just 12 months.
If you have a $300,000 balance at 6.5% with 25 years left, your payment is roughly $2,025. If you refinance to a new 30-year loan at 5.0% with $5,000 in closing costs, your new payment drops to $1,610. That is a monthly savings of $415. You would "break even" on the closing costs in just 12 months.
Understanding the Break-Even Point
The break-even point is the most critical metric in a mortgage refinance. It tells you exactly how many months you need to stay in the home to recover the closing costs. To calculate this manually, you divide the total closing costs by your monthly payment savings.
If your break-even point is 36 months, but you plan on selling the house in 24 months, refinancing would actually cost you money rather than saving it.
Key Factors That Influence Refinance Savings
- Interest Rate Differential: Traditionally, a drop of 0.75% to 1% is the benchmark for a "worthwhile" refinance.
- Closing Costs: These typically range from 2% to 5% of the loan amount. They include appraisal fees, title insurance, and origination points.
- Loan Term: If you reset a 20-year remaining balance to a new 30-year term, your monthly payment will drop significantly, but you might pay more total interest over time. Always check the "Total Interest Savings" metric.
FAQs About Refinancing
Should I refinance if my rate only drops by 0.5%?
It depends on your loan balance. On a $500,000 loan, a 0.5% drop results in significant monthly savings. On a $100,000 loan, the savings might not cover the closing costs quickly enough.
Can I wrap closing costs into the loan?
Yes, this is common. However, it increases your principal balance, which means you will pay interest on those fees for the life of the loan.