Is it time to refinance or run? Use this calculator to help!
Is Refinancing Right for You?
Refinancing can be a powerful financial move, but it’s not always the right choice. A lower interest rate or reduced monthly payment may sound appealing, but the upfront costs of refinancing can sometimes outweigh the benefits. The Refinancing Calculator helps you crunch the numbers to see if refinancing is worth it in your case.
This post will explain how refinancing works, when it makes sense, and let you use the calculator to evaluate your options.
What Is Refinancing?
Refinancing replaces your current loan with a new one, often at a lower interest rate or with a different loan term. People refinance to:
Save on Interest: A lower rate reduces the cost of borrowing.
Lower Monthly Payments: Stretching payments over a longer term can reduce your monthly obligations.
Adjust Loan Terms: Switch from a variable rate to a fixed rate for stability, or vice versa.
However, refinancing isn’t free. Lenders charge closing costs for the new loan, which can include origination fees, appraisal costs, and title fees. It’s important to calculate whether the savings outweigh these costs.
When Does Refinancing Make Sense?
Refinancing is most beneficial when:
Your New Interest Rate Is Significantly Lower: A 1–2% drop in your rate can lead to substantial savings, especially for long-term loans like mortgages.
You Plan to Stay in the Loan Long Enough to Break Even: You need to stay in the loan long enough to recover the closing costs with the monthly savings.
You Need to Lower Monthly Payments: If cash flow is tight, refinancing to extend the loan term may help.
Example: Refinancing in Action
Let’s say:
Remaining Balance: $200,000
Current Rate: 5%
Remaining Term: 20 years
New Rate: 4%
Closing Costs: $3,000
With the current loan, you’d pay $116,779 in interest over the next 20 years. Refinancing to 4% reduces the interest to $91,735, saving you $25,044 in total. If your monthly savings are $150, it will take 20 months to recover the $3,000 closing costs. After that, every dollar saved is yours.
Use the Refinancing Calculator Below
Enter your loan details to see if refinancing is the right move for you:
Refinancing Calculator
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Is Refinancing Right for You?
Refinancing can be a powerful way to save money or lower your monthly obligations, but it’s not a one-size-fits-all solution. Use the Refinancing Calculator above to see if the math works in your favor. With a clear picture of your savings and break-even point, you can decide with confidence whether refinancing is right for you.
Let me know if you’d like further adjustments!