Finance & Business
Refinance Calculator
Compare your current mortgage with refinancing options to see potential savings and costs.
Enter your loan details to see refinancing options
Related to Refinance Calculator
The refinance calculator helps you determine if refinancing your mortgage makes financial sense by comparing your current loan with potential new loan terms. It takes into account your existing loan balance, interest rate, and remaining term, along with the proposed new loan's terms and associated closing costs. The calculator provides a comprehensive analysis of potential savings and the break-even point.
Key Calculations
The calculator uses the standard amortization formula to determine monthly payments for both current and new loans. It then compares these payments to calculate monthly savings, total interest savings over the loan term, and the time required to recover closing costs (break-even point). The amortization schedules are also compared to show how the loan balances will decrease over time.
Break-even Analysis
The break-even point is calculated by dividing the total closing costs by the monthly savings. This tells you how many months it will take to recover the costs of refinancing through the reduced monthly payments. This is a crucial metric in determining whether refinancing is worthwhile, especially if you plan to sell or move before reaching this point.
The calculator provides several key metrics to help you make an informed decision about refinancing. Understanding these results is crucial for determining whether refinancing is the right choice for your financial situation.
Monthly Payment Comparison
Compare your current monthly payment with the projected new payment. A lower monthly payment could free up cash flow for other financial goals, but consider whether the total cost over the loan term aligns with your financial strategy.
Total Savings Analysis
The total savings figure accounts for both the reduced monthly payments and the closing costs. A positive number indicates that refinancing could save you money over the full term of the loan, while a negative number suggests the costs outweigh the benefits.
Loan Balance Comparison
The graph shows how both loan balances decrease over time. This visual representation helps you understand the long-term impact of refinancing on your mortgage balance and equity building.
1. When is the best time to refinance?
The best time to refinance typically depends on several factors: when interest rates are significantly lower than your current rate (usually at least 0.5-1% lower), when your credit score has improved significantly, when you've built up enough equity (usually at least 20%), and when you plan to stay in your home long enough to recoup the refinancing costs.
2. What costs are involved in refinancing?
Refinancing costs typically include application fees, origination fees, appraisal fees, title search and insurance, attorney fees, and other closing costs. These can range from 2% to 6% of your loan amount. It's important to factor in all these costs when calculating the potential benefits of refinancing.
3. Should I refinance to a shorter loan term?
Refinancing to a shorter term (like from a 30-year to a 15-year mortgage) can help you pay off your home faster and save significantly on interest, but it usually means higher monthly payments. This decision should be based on your financial goals, income stability, and ability to handle larger payments.
4. How does refinancing affect my credit score?
Refinancing typically causes a small temporary dip in your credit score due to the hard inquiry during the application process. However, this effect is usually minimal and short-lived. Making regular payments on your new loan can help your credit score recover and potentially improve over time.
5. What is the scientific source for this calculator?
This calculator uses standard financial mathematics and amortization formulas recognized by the financial industry. The calculations are based on the time value of money principles and compound interest formulas published in financial textbooks and used by financial institutions. The amortization formula used is: M = P[r(1 + r)^n]/[(1 + r)^n - 1], where M is the monthly payment, P is the principal, r is the monthly interest rate, and n is the total number of payments. This formula is derived from the present value of an annuity formula and is the industry standard for calculating mortgage payments and refinancing scenarios.