Mortgage Refinance Calculator

What This Calculator Does

The Mortgage Refinance Calculator provides a clear, side-by-side comparison between your current mortgage terms and potential refinancing options. By inputting your loan details and new rates, this tool helps you assess monthly savings, total interest saved, break-even period, and overall impact on your financial situation. Use this calculator to make smart, informed decisions about whether refinancing your mortgage fits your goals.

How to Use This Calculator

1. Gather your current mortgage statement to find your outstanding balance, current interest rate, remaining term in months, and current monthly payment.
2. Enter your home’s current appraised value, annual property tax rate (as a percent), and your yearly home insurance premium.
3. Input your proposed refinance details, including the new interest rate, desired loan term (in months), and estimated closing costs.
4. Enter your monthly income and monthly expenses to assess how the new loan will affect your debt-to-income ratio.
5. Provide your current credit score to help estimate potential credit score impact and ensure your refinance options are realistic.
6. Review the calculator’s outputs, including your new monthly payment, monthly and total interest savings, break-even period, and financial ratios.
7. Compare the results and use the actionable insights to decide if refinancing your mortgage aligns with your financial strategy.

Definitions of Key Terms

Current Balance ($)

The remaining principal amount you owe on your current mortgage loan.

Current Interest Rate (%)

The annual percentage rate you pay on your existing mortgage.

Remaining Term (months)

The number of months left until your current mortgage is fully paid off.

Current Monthly Payment ($)

The amount you currently pay each month toward your mortgage, excluding taxes and insurance.

Current Home Value ($)

The present-day market value of your property, typically based on a recent appraisal or market analysis.

Annual Property Tax Rate (%)

The yearly tax rate assessed by your local government, expressed as a percentage of your home’s value.

Annual Home Insurance ($)

The total yearly cost of insuring your property against risks like fire, theft, and natural disasters.

New Interest Rate (%)

The projected annual interest rate for your refinanced mortgage.

New Loan Term (months)

The number of months you intend to take to repay the refinanced mortgage.

Closing Costs ($)

The one-time fees and expenses you pay at the closing of your refinance loan, including lender fees, appraisal, and title insurance.

Monthly Income ($)

Your total gross monthly income from all sources.

Monthly Expenses ($)

Your regular monthly financial obligations, such as credit card payments, car loans, and other debts.

Credit Score

A numerical rating (typically 300-850) that lenders use to assess your creditworthiness.

New Monthly Payment

Your estimated monthly mortgage payment with the refinanced loan, not including taxes and insurance.

Monthly Savings

The difference between your current and new monthly payments, representing your potential monthly cash flow improvement.

Total Interest Savings

The total projected reduction in interest paid over the life of the loan if you refinance, after accounting for closing costs.

Break-even Period

The number of months it takes for your cumulative monthly savings to equal the cost of refinancing.

Current Total Interest

The total interest you would pay over the remaining life of your current mortgage without refinancing.

New Total Interest

The total interest you would pay over the life of the refinanced mortgage.

Debt-to-Income Ratio

A percentage that compares your total monthly debt payments to your gross monthly income, an important factor for loan approval.

Loan-to-Value Ratio

The ratio of your loan amount to your home’s appraised value, used by lenders to assess risk.

Monthly Property Tax

Your annual property tax divided by 12, reflecting the monthly cost.

Monthly Insurance

Your annual home insurance premium divided by 12, representing your monthly insurance expense.

Credit Score Impact

An estimate of how refinancing may affect your credit score based on the application and new loan.

Calculation Methodology

Monthly Property Tax = (Current Home Value * Annual Property Tax Rate) / 12

Monthly Insurance = Annual Home Insurance / 12

Current Total Interest = (Current Monthly Payment * Remaining Term) - Current Balance

New Monthly Payment = [New Loan Principal * (New Interest Rate / 12)] / [1 - (1 + New Interest Rate / 12)^(-New Loan Term)]

New Total Interest = (New Monthly Payment * New Loan Term) - New Loan Principal

Monthly Savings = Current Monthly Payment - New Monthly Payment

Total Interest Savings = (Current Total Interest + Closing Costs) - New Total Interest

Break-even Period (months) = Closing Costs / Monthly Savings

Loan-to-Value Ratio = (Current Balance / Current Home Value) * 100

Debt-to-Income Ratio = (Total Monthly Debts / Monthly Income) * 100

Credit Score Impact = Estimated based on credit inquiry and new loan application

In these formulas, “principal” refers to the loan amount, and all rates are expressed as decimals (for example, 6 percent is 0.06). The “New Monthly Payment” is calculated using the standard mortgage amortization formula. “Monthly Savings” and “Total Interest Savings” show your cash flow improvement and long-term benefit after refinancing. The “Break-even Period” tells you how many months it takes for your savings to cover the cost of refinancing. Loan-to-value and debt-to-income ratios are key factors for lender approval. Credit score impact varies with your financial profile and is estimated.

Practical Scenarios

• Lowering Your Monthly Payment: You have a mortgage balance of $250,000 at 6.5 percent interest with 20 years remaining. By refinancing to a 5 percent rate for a 20-year term, you can see how much your monthly payment drops and how the reduced interest affects your long-term savings.
• Shortening the Loan Term: You want to refinance from a 30-year to a 15-year mortgage. This scenario helps you calculate the new monthly payment, compare total interest costs, and decide if the higher monthly payment is worth the financial benefit.
• Accessing Home Equity: You need cash for home improvements and are considering a cash-out refinance. The calculator can help you determine if your new payment and loan-to-value ratio still fit within lender guidelines and your budget.
• Improving Debt-to-Income Ratio: You have increased income or paid off other debts. Input your updated financials to see how refinancing impacts your debt-to-income ratio and your eligibility for the best rates.

Advanced Tips & Best Practices

• Consider All Costs: Always include closing costs and fees in your calculations. Factoring in these expenses ensures you know your true break-even period and net savings.
• Evaluate Shorter Terms: A shorter loan term often means higher monthly payments but can significantly reduce total interest paid over the life of the loan.
• Monitor Your Credit Score: Check your credit score before applying for a refinance. Higher scores unlock better rates and lower costs.
• Watch Rate Locks: Interest rates can change quickly. Consider locking your rate once you find a favorable offer to avoid unexpected increases during the closing process.
• Compare Lenders: Shop around with multiple lenders to find the most competitive rates, lowest fees, and best overall terms for your refinance.

Frequently Asked Questions (Optional)

Will refinancing always save me money?

Not necessarily. Whether you save money depends on your new interest rate, loan term, closing costs, and how long you plan to stay in the home. Use the break-even period to decide if refinancing is worthwhile for your situation.

How does refinancing affect my credit score?

Applying for a refinance generates a hard inquiry on your credit report and closes your existing loan, which may cause a temporary dip in your score. Over time, making timely payments on your new loan can help improve your credit.

What loan-to-value ratio do I need to qualify for refinancing?

Most lenders require a loan-to-value ratio under 80 percent to avoid private mortgage insurance, though some loans allow higher ratios. Use this calculator to estimate your current LTV and see if you qualify.