# Mortgage Refinance Calculator

## Introduction

Refinancing a mortgage can be an advantageous financial move for many homeowners. By refinancing, you can take advantage of lower interest rates or adjust the terms of your loan to fit your goals and needs better. But before making any decisions, knowing how much money can be saved through refinancing; that's where a mortgage refinance calculator comes in handy.

## What is a Mortgage Refinance Calculator?

A mortgage refinance calculator is an online tool that estimates your potential savings when refinancing your mortgage. Input information about your current loan (such as its amount, interest rate, and the remaining term) along with details about the new loan you're considering. The refinance calculator  then estimates your new monthly payment, total interest paid, and when you will break even on refinancing costs.

## How Does a Mortgage Refinance Calculator Work?

To use a mortgage refinance calculator, you must input information such as your loan's current balance, interest rate, and loan term. The refinance calculator will then determine the loan's total Cost, both with and without refinancing. It will also calculate the amount of money you would save by refinancing and the amount of time it will take to break even on the Cost of refinancing.

Example of a Mortgage Refinance Calculator

Let's say you have a loan with a balance of \$150,000, a 4.5% interest rate, and a loan term of 30 years. Using a mortgage refinance calculator, you can compare the Cost of refinancing this loan against the savings you would gain. The calculator might tell you that if you refinance to a loan with an interest rate of 3.5%, you would save \$159 per month and break even on the Cost of refinancing in 3.2 years.

The formula for a Mortgage Refinance Calculator

The following formula can be used to calculate the break-even point of a refinancing:

Break Even Point = Refinancing Cost / (Monthly Savings x 12)

Where:

Refinancing Cost = The total Cost of refinancing the loan

Monthly Savings = The amount of money you would save each month by refinancing your loan

For example, if the total cost of refinancing is \$3000 and you would save \$200 each month by refinancing, the break-even point would be calculated as follows:

Break Even Point = 3000 / (200 x 12)

Break Even Point = 1.5 years

How to Use a Mortgage Refinance Calculator
Using a mortgage refinance calculator is easy. Here are the steps:

Gather your current mortgage information, including your loan amount, interest rate, and remaining term.
Research potential new loans, including interest rates and fees.
Enter your current mortgage information and the details of the new loan into the calculator.
Review the estimated savings and other key metrics provided by the calculator.
Example of Using a Mortgage Refinance Calculator
Let's say you have a 30-year fixed-rate mortgage of \$300,000 with an interest rate of 4.5%. You've been making payments for five years and have 25 years remaining on loan. You're considering refinancing to a new 30-year fixed-rate mortgage with an interest rate of 3.5%.

Using a mortgage refinance calculator, you enter the following information:

Loan amount: \$300,000
Interest rate: 4.5%
Remaining term: 25 years
New interest rate: 3.5%
New loan term: 30 years
Closing costs: \$5,000

The calculator estimates that your new monthly payment would be \$1,347, down from \$1,520. You would save \$173 per month or \$62,280 over the life of the loan. It would take 2.4 years to break even on the closing costs of the new loan.

The formula for Calculating Refinance Savings
If you want to calculate refinance savings on your own, you can use the following formula:

Savings = Monthly payment reduction x Number of months remaining on a current loan

For example, if you're currently paying \$1,500 monthly on your mortgage and refinance to a new loan with a payment of \$1,200 monthly, your monthly payment reduction would be \$300. If you have 300 months remaining on your current loan, your total savings would be:

Savings = \$300 x 300 = \$90,000