Mortgage Refinance Calculator
See if refinancing your mortgage could save you money.
Refinance Comparison
| Metric | Current Loan | New Loan |
|---|---|---|
| Monthly Payment (P&I) | $0.00 | $0.00 |
| Total Interest Paid | $0.00 | $0.00 |
| Total Cost (P&I + Costs) | $0.00 | $0.00 |
How to Use the Mortgage Refinance Calculator
Enter your Current Loan Balance, Interest Rate, and Remaining Term (in years).
Input the details of the New Loan Offer: Interest Rate and Term.
Estimate the upfront Refinance Costs (closing costs, fees, points).
Click "Calculate Savings" to compare payments, total costs, and see the breakeven point.
Frequently Asked Questions
What is the breakeven point?
+The breakeven point is the time it takes for the monthly savings from refinancing to cover the upfront refinance costs. If you plan to stay in the home longer than the breakeven point, refinancing might be financially beneficial.
What are typical refinance costs?
+Refinance costs (closing costs) can vary widely but often include appraisal fees, title insurance, recording fees, and potentially points paid to lower the interest rate. They typically range from 2% to 5% of the loan amount.
Should I choose a shorter or longer term when refinancing?
+Refinancing to a shorter term (e.g., 15 years) usually results in higher monthly payments but significantly less total interest paid. Refinancing to a new 30-year term might lower your monthly payment but could increase the total interest paid, especially if you were already far into your original loan.
Does this calculator consider cash-out refinancing?
+No, this calculator assumes a rate-and-term refinance where the new loan amount is roughly equal to the current balance plus refinance costs (if rolled into the loan). A cash-out refinance involves borrowing more than your current balance, which would change the calculations significantly.
Learn More About Mortgage Refinancing
1. Introduction: Evaluating a Mortgage Switch
Refinancing your mortgage means replacing your existing home loan with a new one, often to take advantage of lower interest rates, change the loan term, or tap into home equity. While refinancing can potentially save you significant money over the life of the loan or lower your monthly payments, it's not always the right move. It involves upfront costs (closing costs) and requires careful consideration of your financial goals and how long you plan to stay in the home. Our Mortgage Refinance Calculator helps you compare your current mortgage with a potential new loan offer to estimate the potential savings and determine the breakeven point.
2. How the Calculator Works: Comparing Loan Scenarios
The calculator analyzes two loan scenarios side-by-side:
- Current Mortgage: Requires your outstanding loan balance, current annual interest rate, and the remaining term in years.
- New Mortgage Offer: Requires the proposed new annual interest rate, the new loan term (e.g., 15 or 30 years), and the estimated upfront costs associated with refinancing (closing costs, fees, points).
For each scenario, the calculator determines:
- Monthly Payment (P&I): Calculated using the standard mortgage payment formula based on the respective loan balance, rate, and term.
- Total Interest Paid: The total amount of interest paid over the remaining life of the current loan or the full term of the new loan.
- Total Cost: For the current loan, it's the remaining principal + total future interest. For the new loan, it's the new principal (current balance + refinance costs rolled in, assumed here) + total interest on the new loan.
Key Outputs:
- Comparison Table: Shows the Monthly Payment and Total Interest/Cost side-by-side.
- Monthly Savings: The difference between the current and new monthly P&I payments.
- Lifetime Savings (Net): The difference in total cost between keeping the current loan and getting the new loan (accounting for refinance costs).
- Breakeven Point: The number of months it takes for the cumulative monthly savings to offset the upfront refinance costs (
Refinance Costs / Monthly Savings).
The chart visually compares the monthly payments and total interest paid for both loans.
3. Why It Matters / Benefits: Potential Savings & Goals
Refinancing can be beneficial for several reasons:
- Lower Interest Rate: Securing a lower rate than your current mortgage can reduce monthly payments and save significant interest over the loan term.
- Lower Monthly Payments: Even without a lower rate, extending the loan term (e.g., refinancing a 15-year loan with 10 years left into a new 30-year loan) can lower payments, freeing up cash flow (but likely increasing total interest).
- Shorten Loan Term: Refinancing from a 30-year to a 15-year term (often with a lower rate) increases monthly payments but builds equity faster and saves substantial interest.
- Switch Loan Types: Move from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage for payment stability, or vice-versa.
- Cash-Out Refinance: Borrow against your home equity by taking out a new loan larger than your current balance (not directly calculated here, but understanding the base refi helps). Use the Home Equity Calculator to estimate available equity.
This calculator helps quantify the potential benefits of a rate-and-term refinance.
4. Common Mistakes & Considerations
- Ignoring Closing Costs: Refinancing isn't free. Factor in appraisal fees, title insurance, origination fees, etc. Ensure the savings outweigh these costs within a reasonable timeframe (breakeven point).
- Resetting the Clock: Refinancing into a new 30-year loan when you only had 20 years left on your old one means you'll be paying for longer, potentially increasing total interest paid even with a lower rate.
- Focusing Only on Payment: A lower payment might be tempting, but analyze the total interest paid, especially if extending the term.
- Not Shopping Around: Rates and fees vary significantly between lenders. Get multiple quotes.
- Impact on PMI: Refinancing might require a new appraisal. If your home value hasn't increased enough or your new loan-to-value (LTV) ratio is above 80%, you might still have to pay Private Mortgage Insurance (PMI).
- Time Horizon: If you plan to sell your home before the breakeven point, refinancing might not be worth the upfront costs.
5. Expert Tips / Best Practices
- Rule of Thumb (Rate Drop): Historically, a common guideline was to consider refinancing if you could lower your rate by at least 1%, but the breakeven analysis is more precise.
- Calculate Your Breakeven: Use the calculator to determine how long it takes to recoup the closing costs through monthly savings.
- Compare APRs: When available, the Annual Percentage Rate (APR) is the most standardized way to compare the overall cost of loans, including fees. Use the APR Calculator.
- Consider a Shorter Term: If you can afford the higher payments, refinancing to a 15-year mortgage builds equity much faster and saves enormous amounts of interest.
- Check Your Credit Score: A better credit score qualifies you for lower interest rates.
- No-Cost Refinance: Be wary of "no-cost" refinances. Often, the costs are rolled into a higher interest rate or added to the loan principal. Analyze the total cost carefully.
6. Conclusion: Make the Right Refinance Choice
Refinancing your mortgage can be a smart financial move under the right circumstances, potentially lowering your monthly payments or saving you thousands in interest. However, it's crucial to weigh the benefits against the costs and consider your long-term plans. Our Mortgage Refinance Calculator provides the key numbers â€" payment changes, lifetime savings, and the breakeven point â€" to help you make an informed decision about whether refinancing aligns with your financial goals.