Tuesday, February 4, 2014

Mortgage Refinance Calculator

Mortgage Refinance Calculator

How much could you save if you refinance your mortgage?  A mortgage refinance, also known as a "refi", means that you get a new mortgage for your home at a lower interest rate.  This mortgage refinance calculator shows you how much you will save based on the interest rate of the mortgage refinance loan.

Enter the information for your current mortgage loan information and the interest rate for the mortgage refinance loan in the calculator below and click "Compute" to see how much you can save by refinancing.  Example entries have been filled in for a 100,000 mortgage balance with 30 year term, monthly payment of $537 that started 3 years ago.  The example mortgage refi has an interest rate of 3% and an origination fee of $2000.  Simply change the example information to the information for your mortgage.

Mortgage Refi Calculator by Dr. Penny Pincher
Will you save money if you refinance your mortgage?
Copyright (c) 2014. All Rights Reserved
Enter Current Mortgage Balance ($):
Enter Term of Current Mortgage (years):
Enter Current Monthly Payment (Principal and Interest) ($):
Enter Time Since Current Mortgage Started (years):
Enter Interest rate for Refinance Loan (%):
*This interest rate is for the new refi loan, not the current loan!
Enter Origination Fee for Refinance Loan ($):
*This is the cost the bank charges to finance the new loan
Cost of Current Mortgage- now to end ($):
RESULTS- Analysis of Mortgage Refinance
New Monthly Payment ($):
Savings on Monthly Payment ($):
New Loan cost (now to end) ($):
Time to break-even on refi (mo):
Total savings over life of refinance loan:

Mortgage Refinance Calculator Instructions

  • The current mortgage balance is the amount that you currently owe on your mortgage.
  • The current mortgage term is the total duration of your current mortgage, typically 30 years.
  • The current monthly payment is the amount of your principal and interest payments on your current mortgage.  Your total monthly mortgage payment includes Principal, Interest, Taxes, and Insurance.  For this calculation, you need the amount of principal plus interest only.  If you don't have this information handy, don't worry.  You can calculate your principal and interest payment if you know the mortgage amount and interest rate using the calculator below:

Mortgage Calculator by Dr. Penny Pincher
Calculate your Mortgage Principal and Interest Payment
Copyright (c) 2014. All Rights Reserved
Enter Initial Mortgage Balance ($):
Enter Term of Current Mortgage (years):
Enter Interest rate for Mortgage (%):
Principal+Interest Payment ($):

You can use this mortgage calculator to calculate the principal + interest payment on your current mortgage using the original mortgage balance and current mortgage interest rate.

If you want to see how Principal, Interest, Taxes, and Insurance contribute to your monthly mortgage payment, check out this mortgage calculator.

  • The time since your current mortgage started is needed to determine how much you can save by refinancing.  You can input decimal values, such as 3.25 years.
  • The next entry is the interest rate for your new refinance loan.  You can look up current refinance rates in newspapers or on the internet.
  • It costs money to get a mortgage loan-this is known as the origination fee.  The Mortgage Refinance Calculator determines how long it will take to break-even on a refinance using the origination fee and your monthly savings.  In this case, the break-even time means how long it takes your monthly payment savings to cover the refinance origination fee.  The refinance loan origination fee is added to the refi loan amount in the calculator.
  • Check the bottom line of the calculator: Total savings over life of refinance loan.  If a negative value is shown for savings, you will loose money over the life of the loan by refinancing!  
    • One way this can happen is if you nearly have your current mortgage paid off.  Let's say you are paying $500 per month and have 5 years left to pay off your mortgage.  If you refinance you could get a new 30 year mortgage and save hundreds of dollars per month on payments- but you will be making payments for 30 more years rather than 5.  
    • So even if the refi interest rate is lower, continuing to make payments longer can still add up to more money paid on interest.  You can pay more by refinancing in a scenario where you have almost paid off your original loan.
    • Note that the calculator assumes you will have the same term for the refinance that you had for the original mortgage.  For example, if the original mortgage was a 30 year loan, the calculator uses a 30 year term for the refinance loan.

Saving Money with a Mortgage Refinance

As you can see when trying out refinance scenarios, it takes some time to break-even on the refinance to cover the cost of the refinance loan origination fee.  Since your interest rate on the refinance loan is lower, you'll save money every month.  It will take months of interest rate savings to cover the refinance fee- perhaps even a few years, depending on interest rates.

Getting a mortgage refinance makes sense only if you will be staying in your current house for awhile.  You can use the calculator to see how long you would need to stay in your current house for a mortgage refinance to make sense.

Another good use of the calculator is to see how much money you would actually save by refinancing before going through the effort- and fees- to get a new mortgage loan.

If you are interested in how mortgage payments are calculated, the mortgage payment formulas used in the calculators are from the Mortgage Professor.

Recommended Reading:
How to Become a Millionaire- The Millionaire Calculator

Credit Card Consolidation Loan Calculator

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