Mortgage Refinance Calculator

Understanding the Mortgage Refinance Calculator

Refinancing a mortgage means replacing your current home loan with a new one. Homeowners typically refinance to secure a lower interest rate, reduce their monthly payment, or change their loan term. This calculator is designed to help you analyze the financial implications of refinancing, focusing on your monthly savings and the break-even point.

How It Works

The calculator compares your current loan's monthly payment with the payment on a potential new loan.

• Current Loan Details: You provide your outstanding balance, current interest rate, and monthly payment to establish your current financial situation.
• New Loan Details: You input the terms of the potential new loan, including the interest rate and term. Crucially, you also add the closing costs associated with the refinance and any additional cash you plan to take out.

Key Metrics Explained

The calculator provides several key outputs to help your decision:

• Monthly Savings: The most immediate result, showing the difference between your old and new monthly payments.
• Break-Even Point: This is calculated by dividing the total closing costs by your monthly savings. The result is the number of months it will take for the refinance to pay for itself. If you plan to stay in the home longer than this period, refinancing may be financially beneficial.
• Lifetime Savings: This calculation compares the total remaining interest you would pay on your current loan versus the total interest you would pay on the new loan. It provides the ultimate long-term financial impact of the decision.

Frequently Asked Questions