Mortgage Refinance Calculator: Find Your Savings
Use this powerful tool to instantly compare your current mortgage terms with a new refinanced loan. Understanding the **Monthly Payment Difference** and the **Break-Even Point** is crucial for making a sound financial decision. Input your current loan details and the proposed new terms to see your potential savings over the entire loan term, including the impact of closing costs and optional cash-out. All calculations adhere to standard financial formulas for maximum accuracy.
Current Loan Details
Refinance Details
Optional Monthly Escrow Costs
✅ Refinance Calculation Results
Monthly Payment Comparison
Refinancing Your Mortgage: A Comprehensive Guide
Refinancing a mortgage involves replacing your existing loan with a new one, typically to secure a lower interest rate, reduce the monthly payment, or change the loan term. This calculator is designed to provide a clear, side-by-side comparison of the financial impact of such a decision.
How to Use the Calculator
To get the most accurate results, you need to gather detailed information about your current mortgage and the proposed refinance offer. Start by entering your **Current Loan Balance** and **Remaining Loan Term** in months. The core of the comparison relies on the difference between your **Current Interest Rate (%)** and the **New Interest Rate (%)**. Crucially, you must factor in **Refinance Closing Costs** as these upfront fees are the main hurdle to overcome for long-term savings. The **Cash-Out Amount** is optional but must be included if you plan to extract equity from your home.
Calculation Formula Explained
The core of this calculator uses the standard **Monthly Payment Formula (PMT)** to calculate the Principal and Interest (P&I) portion of the payment. The formula is: $$M = P \left[ \frac{r(1+r)^n}{(1+r)^n - 1} \right]$$ Where:
- $M$ is the Total Monthly Payment (P&I).
- $P$ is the Principal Loan Amount (Current Balance + Cash-Out + Closing Costs, for the new loan).
- $r$ is the Monthly Interest Rate (Annual Rate / 12 / 100).
- $n$ is the Total Number of Payments (Loan Term in years × 12).
The final total monthly payment includes optional inputs: $M + \text{Taxes} + \text{Insurance} + \text{PMI}$. This comprehensive approach ensures you see the real, full payment.
Importance of These Calculations
The two most critical outputs are the **Monthly Payment Difference** and the **Break-Even Point**. A lower monthly payment improves immediate cash flow. However, refinancing is only financially beneficial if you plan to stay in the home long enough to pass the **Break-Even Point**—the moment your cumulative monthly savings equal the upfront closing costs. Ignoring closing costs is the most common mistake homeowners make.
Related Tips for a Successful Refinance
- **Improve Your Credit Score:** A higher score qualifies you for the lowest available interest rates.
- **Shop Around:** Get quotes from at least three different lenders to compare rates and closing costs.
- **Evaluate the Term:** Refinancing from a 30-year to a 15-year term will increase your monthly payment but drastically reduce the total interest paid. Compare the total interest figures carefully.
- **Escrow Costs:** Remember that while taxes and insurance are part of your payment (PITI), they are usually escrowed and do not affect the P&I savings derived from the lower interest rate.
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