Mortgage Refinance Calculator

Is Refinancing Right for You?

Considering a mortgage refinance? This calculator helps you make an informed decision. By comparing your current mortgage terms to a new loan offer, it calculates your potential monthly savings and, more importantly, your total lifetime savings after accounting for closing costs. It's a crucial tool for evaluating whether refinancing is a financially sound move.

The Calculation Explained

1. Calculate Original Loan Details: The tool determines your current monthly payment and the remaining principal on your existing mortgage.
2. Calculate New Loan Details: It then calculates the new monthly payment based on the refinanced loan amount (remaining balance + closing costs), new interest rate, and new term.
3. Compare: It shows the difference in monthly payments and the difference in total interest paid over the remaining life of the loan.

How to Use the Calculator

• Original Loan: Enter the details of your current mortgage: original amount, interest rate, term, and how many years are left.
• New Loan: Enter the terms of the new loan you are considering: new rate, new term, and any closing costs.

Real-World Example

You have a $300,000, 30-year mortgage at 6.5% with 25 years remaining. Your current payment is about $1,896. You are offered a new 20-year loan at 5.5% with $5,000 in closing costs.

• Your remaining balance is approx. $278,000.
• Your new loan amount would be $283,000 ($278k + $5k).
• Your new monthly payment would be approx. $1,873.
• Monthly Savings: $23/month
• Lifetime Savings: Despite the small monthly saving, by shortening the term from 25 to 20 years, you would save over $100,000 in interest over the life of the loan.

Frequently Asked Questions (FAQ)

• When does refinancing make sense? It typically makes sense if you can lower your interest rate by at least 0.75-1%, if you plan to stay in the home long enough to pass the 'break-even point' (where your savings surpass the closing costs), or if you want to switch from an adjustable-rate to a fixed-rate mortgage.
• What are closing costs? These are fees for services like the appraisal, title search, and loan origination. They typically range from 2% to 5% of the new loan amount.
• What is a cash-out refinance? This is when you borrow more than you owe on your current mortgage and take the difference in cash. It's a way to tap into your home's equity, but it increases your loan balance. This calculator is not designed for cash-out refinancing.