# Refinance Calculator

Published: 4/25/2021 Last updated: 2/20/2023

## Refinance Calculator: A Comprehensive Guide

If you're considering refinancing your mortgage, it's important to understand the potential benefits and costs of doing so. One tool that can help you weigh your options is a refinance calculator. In this article, we'll explain what a refinance calculator is, how it works, and provide some examples to help you understand how to use it effectively.

### Refinance Calculator Definition

A refinance calculator is a tool that helps you calculate the potential savings or costs of refinancing your mortgage. The calculator takes into account various factors, such as your current interest rate, the new interest rate, closing costs, and the length of the loan. By inputting these values into the calculator, you can get an estimate of your potential savings or costs over the life of the loan.

### Refinance Calculator Formula

The formula used by a refinance calculator varies depending on the specific calculator you use. However, the general formula used by most refinance calculators is as follows:

Savings = (Current Monthly Payment - New Monthly Payment) x Months Left in the Loan

In this formula, "Savings" refers to the total amount you could potentially save by refinancing your mortgage. "Current Monthly Payment" is the amount you currently pay each month for your mortgage, while "New Monthly Payment" is the amount you would pay if you refinanced at a lower interest rate. "Months Left in the Loan" refers to the remaining length of your current mortgage.

### Refinance Calculator Conversion Factor

The conversion factor used in a refinance calculator is the interest rate. This rate determines the amount of interest you will pay on your mortgage each month. A lower interest rate can save you money over the life of your loan, while a higher interest rate can cost you more. When using a refinance calculator, it's important to input accurate interest rates to get an accurate estimate of your potential savings or costs.

### Refinance Calculator Examples

To help you better understand how a refinance calculator works, here are some examples:

Example 1: Current Mortgage: \$200,000 Current Interest Rate: 5% Current Monthly Payment: \$1,073 Remaining Loan Term: 20 years

Refinanced Mortgage: \$200,000 New Interest Rate: 4% New Monthly Payment: \$955 Remaining Loan Term: 20 years

Using the refinance calculator formula, we can calculate the potential savings:

Savings = (\$1,073 - \$955) x 240 Savings = \$28,320

In this example, refinancing the mortgage could save the borrower \$28,320 over the remaining life of the loan.

Example 2: Current Mortgage: \$250,000 Current Interest Rate: 4% Current Monthly Payment: \$1,193 Remaining Loan Term: 30 years

Refinanced Mortgage: \$250,000 New Interest Rate: 3.5% New Monthly Payment: \$1,123 Remaining Loan Term: 30 years

Using the refinance calculator formula, we can calculate the potential savings:

Savings = (\$1,193 - \$1,123) x 360 Savings = \$25,200

In this example, refinancing the mortgage could save the borrower \$25,200 over the remaining life of the loan.

### Refinance Calculator Examples in Excel

If you prefer to use Excel, you can create your own refinance calculator by using the formula and examples above. Here's how to do it:

1. Open a new Excel spreadsheet.
2. In cell A1, enter "Current Mortgage."
3. In cell B1, enter the current mortgage amount.
4. In cell A2, enter "Current Interest Rate."
5. In cell B2, enter the current interes rate as a percentage.
6. In cell A3, enter "Current Monthly Payment.
7. In cell B3, enter the current monthly payment amount.
8. In cell A4, enter "Remaining Loan Term."
9. In cell B4, enter the remaining length of the loan in months.
10. In cell A5, enter "Refinanced Mortgage."
11. In cell B5, enter the new mortgage amount.
12. In cell A6, enter "New Interest Rate."
13. In cell B6, enter the new interest rate as a percentage.
14. In cell A7, enter "New Monthly Payment."
15. In cell B7, enter the new monthly payment amount.
16. In cell A8, enter "Savings."
17. In cell B8, enter the refinance calculator formula: =(B3-B7)*B4.
18. Adjust the cell formats as needed to display the results in currency format.

Using Excel, you can quickly and easily calculate the potential savings of refinancing your mortgage.

### Refinance Calculator Explanation

The purpose of a refinance calculator is to help you determine whether or not refinancing your mortgage is a good financial decision. By taking into account factors such as your current interest rate, the new interest rate, closing costs, and the length of the loan, a refinance calculator can give you an estimate of your potential savings or costs.

It's important to note that a refinance calculator is not a substitute for professional financial advice. While a refinance calculator can provide valuable information, it's always a good idea to consult with a financial advisor or mortgage professional before making any major financial decisions.