Refinance Home Mortgage Calculator

Refinance Formula:

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

New Monthly Payment:

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1. What is Mortgage Refinancing?

Mortgage refinancing is the process of replacing your existing mortgage with a new one, typically to secure a lower interest rate, change the loan term, or convert equity to cash. This calculator helps determine your new monthly payment after refinancing.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

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

Where:

\( \text{Balance} \) — Remaining mortgage balance (USD)
\( \text{new r} \) — New monthly interest rate (annual rate ÷ 12)
\( n \) — Number of remaining payments (years × 12)

Explanation: The equation calculates the fixed monthly payment required to fully amortize the loan over the remaining term at the new interest rate.

3. Importance of Refinancing Calculation

Details: Calculating your new payment before refinancing helps determine if the new loan terms will improve your financial situation and whether the savings justify any closing costs.

4. Using the Calculator

Tips: Enter your current remaining balance, the new interest rate you qualify for, and the desired loan term. All values must be positive numbers (balance > 0, rate between 0-100, term between 1-50 years).

5. Frequently Asked Questions (FAQ)

Q1: When does refinancing make sense?
A: Typically when you can reduce your interest rate by 0.5-1% or more, or when you want to shorten your loan term. The savings should outweigh closing costs.

Q2: How much can I save by refinancing?
A: Savings depend on your current rate, new rate, and remaining term. This calculator shows your new payment amount for comparison.

Q3: Are there costs to refinancing?
A: Yes, typically 2-5% of the loan amount in closing costs. These should be factored into your decision.

Q4: Can I change my loan term when refinancing?
A: Yes, you can choose a shorter or longer term, which will affect your monthly payment and total interest paid.

Q5: Does this calculator account for taxes and insurance?
A: No, it calculates principal and interest only. Your actual payment may include escrow for taxes and insurance.