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Refinancing Formula:
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The Refinancing Calculator helps you determine your new monthly mortgage payment when refinancing your home. It uses the standard loan payment formula to calculate your potential savings or costs.
The calculator uses the standard loan payment formula:
Where:
Explanation: The formula accounts for both principal and interest payments over the life of the loan, calculating a fixed monthly payment amount.
Details: Accurate refinancing calculations help homeowners determine if refinancing makes financial sense by comparing current and potential new payments, considering closing costs and break-even points.
Tips: Enter the new loan amount in dollars, the monthly interest rate as a decimal (e.g., 0.004167 for 5% annual rate), and the loan term in months. All values must be positive numbers.
Q1: How do I convert annual rate to monthly rate?
A: Divide the annual percentage rate by 12 (months) and by 100 (to convert from percentage to decimal). For example, 5% annual = 0.05/12 = 0.004167 monthly.
Q2: Should I include closing costs in the loan amount?
A: Only if you're rolling closing costs into the new loan. Otherwise, use just the principal amount you're borrowing.
Q3: How does refinancing term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest paid.
Q4: What's not included in this calculation?
A: This calculates principal and interest only. Your actual payment may include property taxes, insurance, and PMI if applicable.
Q5: How do I know if refinancing is worth it?
A: Compare total costs (including fees) with savings from lower payments. Calculate the break-even point (when savings exceed costs).