Compare Mortgage Refinance Rates Calculator

Mortgage Payment Formulas:

\[ M1 = P \times \frac{r1 \times (1 + r1)^n}{(1 + r1)^n - 1} \] \[ M2 = P \times \frac{r2 \times (1 + r2)^n}{(1 + r2)^n - 1} \]

Loan Principal:

USD

Current Rate (Annual):

New Rate (Annual):

Loan Term:

years

Current Monthly Payment:

New Monthly Payment:

Monthly Savings:

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1. What is a Mortgage Refinance Comparison Calculator?

Definition: This calculator compares monthly mortgage payments between your current loan and a potential refinance option.

Purpose: It helps homeowners determine potential savings when considering refinancing their mortgage.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula for both rates:

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

Where:

\( M \) — Monthly mortgage payment (USD)
\( P \) — Loan principal amount (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term.

3. Importance of Refinance Comparison

Details: Comparing mortgage payments helps evaluate whether refinancing could save money, considering factors like interest rates, loan terms, and closing costs.

4. Using the Calculator

Tips: Enter your current loan principal, current interest rate, potential new rate, and loan term. The calculator shows both payments and monthly savings.

5. Frequently Asked Questions (FAQ)

Q1: Should I always refinance if the rate is lower?
A: Not necessarily. Consider closing costs and how long you plan to stay in the home to determine if refinancing makes financial sense.

Q2: How does loan term affect refinancing?
A: Shorter terms typically have lower rates but higher payments. Extending your term might lower payments but increase total interest paid.

Q3: What's not included in this calculation?
A: This doesn't account for taxes, insurance, PMI, or refinancing closing costs which can significantly impact the true savings.

Q4: How do I convert annual rate to monthly?
A: Divide the annual rate by 100 to get decimal form, then divide by 12 for the monthly rate (done automatically in the calculator).

Q5: What's a good rule of thumb for refinancing?
A: Many experts suggest refinancing when you can reduce your rate by at least 0.5%-1%, but always run the numbers for your specific situation.