Refinance Calculator With Down Payment

Refinance Formula:

\[ \text{New Loan} = \text{Old Balance} - \text{Down Payment} \] \[ \text{PMT} = \text{New Loan} \times \frac{r}{1 - (1 + r)^{-n}} \]

Old Balance (current balance):

USD

Down Payment (additional cash):

USD

Annual Interest Rate:

Loan Term:

years

New Loan Amount:

Monthly Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Refinance With Down Payment?

Refinancing with a down payment allows you to reduce your principal balance by making an additional payment at the time of refinancing. This can lower your monthly payments and total interest over the life of the loan.

2. How Does the Calculator Work?

The calculator uses two key formulas:

\[ \text{New Loan} = \text{Old Balance} - \text{Down Payment} \] \[ \text{PMT} = \text{New Loan} \times \frac{r}{1 - (1 + r)^{-n}} \]

Where:

\( \text{Old Balance} \) — Current loan balance before refinancing (USD)
\( \text{Down Payment} \) — Additional cash payment applied to principal (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of monthly payments (years × 12)
\( \text{PMT} \) — New monthly payment amount (USD)

Explanation: The calculator first determines your new loan amount after applying your down payment, then calculates the new monthly payment based on the refinanced terms.

3. Importance of Refinance Calculation

Details: Calculating refinance options helps determine if adding a down payment makes financial sense by showing how it affects your monthly payment and total loan cost.

4. Using the Calculator

Tips: Enter your current loan balance, additional down payment amount, new interest rate, and new loan term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When does adding a down payment make sense?
A: When you have available cash and want to reduce monthly payments or shorten the loan term, especially if refinancing to a higher rate.

Q2: How does down payment affect interest savings?
A: Larger down payments reduce principal, leading to less total interest paid over the life of the loan.

Q3: Should I refinance with a down payment or invest the money?
A: Compare potential investment returns against your loan's interest rate - paying down debt gives a guaranteed return equal to your interest rate.

Q4: Are there tax implications?
A: Mortgage interest may be tax-deductible; consult a tax professional about your specific situation.

Q5: Can I use home equity for the down payment?
A: Typically no - the down payment should be separate cash to truly reduce your loan balance.