Refinance calculator
Enter your current loan and a new one to see the new payment, what you save each month and how long the closing costs take to pay back. The totals show what each loan costs from today.
This answer is for the example values in the boxes above. $250,000.00 at 6% with 360 months (30 years) left, refinanced to 5% over 360 months (30 years), closing costs $5,000.00. Change the boxes to see your own answer.
How it works
The calculator works out two loans month by month. The current loan is your balance, your rate and the years left, paid with your payment. The new loan is a rate and a term that count from today. Its balance is what you owe, plus the closing costs if you choose to add them. The interest of each month is rounded to the cent.
The monthly savings are the difference between the two payments. The break-even is the closing costs divided by the monthly savings, rounded up to a whole month. The totals add up every payment from today for each loan, and the closing costs are added to the new one when you pay them at closing.
A worked example
You owe $250,000 at 6 percent with 30 years left, so the payment is $1,498.88. A new loan at 5 percent over 30 years costs $5,000 to get. Its payment is $1,342.05, which is $156.83 less a month.
The costs divided by the savings are 31.88, so you break even after 32 months, which is 2 years and 8 months. From today the current loan costs $539,593.37 in payments and the new loan costs $488,141.28 with the costs, so the refinance costs $51,452.09 less.
Costs added to the loan
Check the box and the $5,000 goes into the new balance. The payment is then $1,368.90, you save $129.98 a month, and nothing is paid at closing, so there is no break-even to show. The new loan costs $492,799.97 in all, which is $46,793.40 less than the current one.
A shorter term, or a payment that you typed
A 15-year loan at 4.5 percent has a payment of $1,912.48. That is $413.60 more a month, and the total paid is $190,346.22 less.
If you type the payment that you make now, the calculator uses it. At $1,600 the current loan ends after 305 months, which is 25 years and 5 months. The new 30-year loan saves $257.95 a month and breaks even after 20 months, which is 1 year and 8 months, but it costs $581.37 more in all. It runs longer, so compare the totals as well as the payment.
What it leaves out
Taxes, insurance, mortgage insurance and the rest of a closing statement are not in it, and the rate is the same for the whole term of each loan. Other costs of moving, and what the savings could earn elsewhere, are not in the totals.
Questions
How do I calculate the break-even point of a refinance?
Divide the closing costs by the monthly savings and round up to a whole month. $5,000 of costs and $156.83 saved a month is 31.88, so the break-even is 32 months, which is 2 years and 8 months.
What does a refinance cost over the whole loan?
Add up every payment from today for each loan, with the closing costs on the new one. On $250,000 at 6% with 30 years left, refinanced to 5% over 30 years with $5,000 of costs, the current loan takes $539,593.37 and the new one $488,141.28, which is $51,452.09 less.
What if the closing costs are added to the loan?
Check the box. The costs raise the new balance, so the payment is $1,368.90 and not $1,342.05, you save $129.98 a month, nothing is paid at closing, and no break-even is shown.
Why can a lower payment cost more in the end?
A longer term spreads the loan over more months. With a payment of $1,600 the current loan ends after 305 months, which is 25 years and 5 months. A new 30-year loan at 5% saves $257.95 a month and costs $581.37 more in all.
Can the new loan have a shorter term?
Yes. A 15-year loan at 4.5% has a payment of $1,912.48, which is $413.60 more than $1,498.88, and the total paid falls by $190,346.22.
Which payment do I enter for my current loan?
The principal and interest part of what you pay now. Leave the box empty and the calculator uses the payment that pays the balance off in the years you have left.
Published .