Home Refinance Calculator

Home Refinance Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

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1. What is the Home Refinance Calculator?

The Home Refinance Calculator helps you determine your new monthly mortgage payment when refinancing your home loan. It uses the standard loan payment formula to calculate your payment based on the new loan amount, interest rate, and term.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( PMT \) — Monthly payment
\( P \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term, including both principal and interest.

3. Importance of Refinance Calculation

Details: Calculating your potential refinance payment helps you determine if refinancing makes financial sense by comparing your current payment to the new payment and considering closing costs.

4. Using the Calculator

Tips: Enter the new loan amount, annual interest rate (as a percentage), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I include closing costs in the loan amount?
A: Only if you plan to roll closing costs into your new loan. Otherwise, use just the principal amount you're borrowing.

Q2: How does the interest rate affect my payment?
A: Higher rates increase your monthly payment, while lower rates decrease it. Even small rate changes can significantly impact your payment over time.

Q3: What's the benefit of a shorter loan term?
A: Shorter terms typically have lower interest rates and save you money long-term, but result in higher monthly payments.

Q4: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Your actual payment may include escrow for taxes and insurance.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans. For adjustable-rate mortgages (ARMs), results would only be accurate for the initial fixed period.