Refinance Calculator

Calculate Your Refinance Payment

Use this calculator to estimate your monthly payments after refinancing your mortgage. Input your current loan details and the new loan terms to see how much you could save.

Input Loan Details

Example: Enter the total loan amount after refinancing (e.g., $200,000).
Example: Enter the new annual interest rate after refinancing (e.g., 3.5%).
Example: Enter the new loan duration after refinancing (e.g., 15 years).

Understanding Mortgage Refinancing

Mortgage refinancing is the process of replacing your existing home loan with a new one, typically with more favorable terms, such as a lower interest rate, shorter loan term, or both. When you refinance, the new loan pays off your old mortgage, and you begin making payments on the new loan. This can save you money over time, especially if your new interest rate is significantly lower.

Why Consider Refinancing?

There are several reasons homeowners choose to refinance their mortgages:

  • Lower Interest Rate: One of the most common reasons to refinance is to take advantage of lower interest rates. Even a small reduction in your interest rate can lead to substantial savings over the life of the loan.
  • Shorten Loan Term: Refinancing to a shorter-term loan, such as moving from a 30-year mortgage to a 15-year mortgage, can help you pay off your loan faster and save on interest payments.
  • Lower Monthly Payment: Refinancing to a longer-term loan or a lower interest rate can reduce your monthly mortgage payments, freeing up cash for other expenses.
  • Switch Loan Types: Some homeowners refinance to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for more predictable payments.
  • Access Equity: Through a cash-out refinance, you can tap into your home’s equity to access funds for home improvements, debt consolidation, or other large expenses.

How to Use a Refinance Calculator

A refinance calculator helps you determine whether refinancing your mortgage makes financial sense. You input your current loan details, such as the loan amount, interest rate, and loan term, as well as the details of the new loan you're considering. The calculator then computes your new monthly payment and the potential savings from refinancing.

Example Calculation

Let's say you have an existing mortgage with a balance of $200,000 at an interest rate of 4.5%, and you have 20 years left on your loan. You are considering refinancing to a new loan with a 3.5% interest rate and a 15-year term. Here's how you would calculate your new monthly payment:

Current Loan Details:
    Loan Amount: $200,000
    Interest Rate: 4.5%
    Remaining Term: 20 years

New Loan Details:
    Loan Amount: $200,000
    Interest Rate: 3.5%
    Loan Term: 15 years

Using the refinance formula, your new monthly payment would be approximately $1,429.77, compared to your current payment of $1,520.06. Over the life of the loan, this reduction in interest rate and loan term would save you thousands of dollars in interest.

When Refinancing Makes Sense

Refinancing makes sense if you can achieve one or more of the following:

  • Lower Your Interest Rate: If interest rates have dropped significantly since you took out your original mortgage, refinancing to a lower rate can save you money on interest payments over the life of the loan.
  • Shorten Your Loan Term: If you can afford higher monthly payments, refinancing to a shorter loan term can help you pay off your mortgage faster and save on interest.
  • Reduce Your Monthly Payment: If you're struggling to meet your current monthly mortgage payment, refinancing to a lower interest rate or longer term can lower your monthly payment and provide financial relief.

Potential Costs of Refinancing

While refinancing can save you money in the long run, it's important to consider the upfront costs involved. These can include:

  • Closing Costs: Just like your original mortgage, refinancing typically comes with closing costs, which can range from 2% to 5% of the loan amount.
  • Appraisal Fees: Most lenders require a home appraisal to determine the current value of your property before approving a refinance.
  • Origination Fees: Lenders may charge a fee for processing and originating your new loan.

Break-Even Point

The break-even point is the point at which the savings from refinancing offset the upfront costs. To calculate your break-even point, divide the total closing costs by the amount you’ll save on your monthly payment. For example, if your closing costs are $3,000 and you’re saving $100 per month on your mortgage payment, your break-even point is 30 months, or 2.5 years. If you plan to stay in your home longer than that, refinancing could be a good financial decision.

Conclusion

Refinancing your mortgage can be a smart financial move if done at the right time and under the right circumstances. It can lower your interest rate, reduce your monthly payments, or help you pay off your loan faster. However, it's essential to carefully consider the costs involved and calculate your break-even point before deciding to refinance. Use our Refinance Calculator to help you make an informed decision and see if refinancing is right for you.