Refinance Calculator
Does it make sense to refinance a mortgage or loan?
advertisement
Introduction to the Refinance Calculator
Your device is too small to show this calculator.
Please rotate to see calculator
Please rotate device or widen browser for a better experience.
This refinancing calculator will tell you exactly how much you'll save.
- Accounts for different loan amounts.
- Compare with and without tax impact.
- Considers recovery cost for new fees, closing costs and points.
Does it pay for you to refinance?
There is more to consider when refinancing a mortgage or loan than the interest rate. If a new loan requires up-front fees or points, determine whether you will keep the loan long enough for the lower payment to recover those up-front costs.
To calculate the actual savings, also consider any tax impact and the investment opportunity created by the lower payments.
This calculator evaluates these factors.
There is more below…
Your device is too small to show this calculator.
Please rotate to see calculator
Please rotate device or widen browser for a better experience.
The Calculator-is refinancing a debt beneficial?
To set your preferred currency and date format, click the “$ : MM/DD/YYYY” link in the lower-right corner of any calculator.
Information
This text is dynamically cleared and added as needed.
Click to make smaller (-) or larger (+).
How to Evaluate a Refinancing Opportunity
- Current Lender (optional) — Name of the lender for a printed report.
- Current Loan Balance — This balance is not the original loan amount. It is the current outstanding balance of the existing loan.
- Periods Remaining Until Paid Off — The number of scheduled payments remaining.
- Annual Interest Rate — The current interest rate for the loan.
- Current Payment — The calculator will calculate the loan payment if you uncheck the checkbox. Allow the calculator to calculate the payment if you want to shorten the term of the loan. Change “Periods Remaining Until Paid Off” to reflect the desired term. The calculator will then calculate the adjusted payment amount (scheduled payment plus any extra amount required). Note: Do not include the escrow portion of the payment. Include only principal and interest.
- Current Payment Frequency — How often payments are due.
- Possible Lender (optional) — Name of the potential new lender for a printed report.
- New Loan Amount — The projected amount of the new loan. This amount can be different from the current loan balance.
- Number of Payments Due — The term of the new loan.
- Anticipated Annual Interest Rate — The expected interest rate for the new loan.
- New Payment Amount — If you uncheck the checkbox, the calculator will calculate the new payment. If you prefer to enter a payment amount, check the option and type the amount. After reviewing the “Results,” you can return to the financing tabs to see the payment the calculator used if it calculated the amount.
- Expected Payment Frequency — The payment frequency for the potential loan.
- Loan Origination Points — For some U.S. mortgages, the lender may require that you pay “points” to receive the lowest interest rate. Enter those points here.
- Miscellaneous Closing Costs — Some loans, typically mortgages, include additional fees and closing costs. Enter those costs here.
- Prepayment Penalty for Current Loan — If the current loan charges a fee for early payoff, enter the fee here. Even though the penalty applies to the existing loan, it is a cost you must pay to obtain the new financing.
- Asset Being Financed (optional) — For the printed report.
- Property Sold After — The loan may be for 15, 20, or 30 years, but you may plan to sell the asset sooner. Enter the number of years until sale. The calculator uses this value to calculate costs and interest paid.
- Interest and Points Are (optional) — Determines the tax impact of interest and points.
- Maximum Interest Deduction — The “Tax Cuts and Jobs Act of 2017” limits the amount of mortgage interest (and property tax) that a mortgage holder may deduct from income taxes. Enter the limit, if applicable.
- Projected Tax Bracket (optional) — Enter your marginal tax rate to see the after-tax impact of refinancing.
- Inflation Rate (optional) — Enter an assumed inflation rate to see the inflation-adjusted impact of refinancing. If the proposed financing saves $100 every month, the inflation-adjusted savings will be lower. Saving $100 in the final month of the loan is less valuable than saving $100 today.
- Investment Rate (optional) — If the new payment is lower than the current payment, you can invest the difference. Enter your expected rate of return.
- If possible financing is greater, invest the difference (optional) — If the proposed financing is greater than the debt being retired, indicate whether you plan to invest the difference. If so, answer “Yes.”
advertisement
Doug Fowler says:
Well done, thank you for making a complicated subject easier.
I have made some notes in all caps for your consideration
By the time you sell after 26 years (LITTLE CONFUSED SINCE I USED 30 YEARS AS SALES DATE, IT APPARENTLY STOPPED COUNTING AT END OF MY LOAN PERIOD), you’ll have paid down $373,348 under your current loan, or $386,999 under the possible refinancing. The amounts used in this analysis are discounted to today’s dollars (adjusted for inflation). The assumed discount rate is 2.0%.
Your current financing will cost you $130,454 (reduced by a $42,960 tax benefit). The possible refinancing will cost you $119,072 (reduced by a $37,962 tax benefit). The cost for the possible financing includes $3,800 in miscellaneous closing costs. So considering just the differences between the two loans: after tax considerations, and other related closing costs you will SAVE $11,382 (NOT A BIG DEAL, BUT POSSIBLE CLARIFICATION …IF YOU TAKE POSSIBLE REFINANCE LOAN). However, the interest savings will increase your taxes by $0 due to the lost deduction. Now, since the payments are LESS under the proposed refinancing than it is under the current financing, you could invest this difference. If the difference in the payments is invested, you will have an estimated gain of $121,883 from the additional investment income.
Bottom line? Your total net SAVINGS will be $133,265. Why are you waiting?
THANK YOU FOR YOUR WORK – WELL DONE!
Karl says:
Thank you for taking the time to write such constructive comments. I’ll incorporate them into the calculator when I put the finishing touches on it.
About the 26 years, what value did you enter for the "Sold after" on the general info tab? Other than that, the termination of point of the calculation, as I recall is the shorter term of the two financing options. But I need to check that.
Ed. Lin says:
I am refinancing from 3.9 to approximately 2.5 percent on a 300000 balance. I can’t seem to enter the 2.5 percent. It is defaulting to 3.0. Is this a bug or am I doing something wrong?
Ed.
Karl says:
Sorry for the problem. On the "Possible Financing" tab, you are trying to set "Anticipated Annual Interest Rate" to 2.5% and it won’t let you? I’m not seeing that problem.
Do you have the calculator set for U.S. dollars? Or perhaps you are using a different currency and that’s what is causing the problem?
Ron says:
When using the Refinance Calculator – Is it worth it?, it won’t let me input a custom value for number of years until asset is sold. Even when I input say 10 years, then click on Next, the explanation keeps going back to 15 years.
Karl says:
Sorry to say, I can’t duplicate the problem. Using the calculator with the values it loads with if I change only the "Property Sold After" to 10 years, I get this result:
"By the time you sell after 10 years, you’ll have paid down $58,966 under your current loan, or $100,000 under the possible refinancing."
Are you setting property sold after to 120 by any chance? I now see that I don’t mention that users need to enter the number of years rather a number of months. I’ll correct that.
Ron Glines says:
This tool is very useful. I’m a mortgage loan officer and I use it frequently. However, I wish it allowed a different value for the “possible loan” vs the “current loan”. When a person refinances their house and they currently owe say 357,000, the new loan amount will always be higher (even if it’s a no cost loan) because the lender has to collect pre-paid interest, property taxes, and homeowner’s insurance. The new loan amount may be $360,000, depending on the day of the month the loan closes, when property taxes are due, and when the homeowners insurance policy renews. Of course, the borrower could elect to pay these pre-paid costs out of pocket at closing, but NOBODY ever does that. They all want to roll those costs into the loan. Thus, the new loan amount is always higher than the balance of the current mortgage. With a higher loan amount, the borrower doesn’t save as much on the new monthly mortgage payment, so there is less to invest. Maybe it’s not an apples to apples comparison, as you say in the error window, but it’s a real world example. Any chance you can incorporate this idea into the calculator?
Thanks
Karl says:
Thank you. I’ll have to take a look at that. It may be a bug. I don’t recall having programmed that limitation.