Financial Calculators
Refinance Calculator

Refinance Calculator

This free and comprehensive refinance calculator can help you calculate monthly payments, amortization, total purchase price, and more.

Current Loan

New Loan

Cash Out and Cost

Savings for the new loan $278.00/month
lifetime savings for the new loan $83,400.00
upfront cost $6,583.26
Principal/Loan Amount $279,163.18 $273,579.92 $-5,583.26
Length 300 months 300 months 0 months
Interest Rate 6% 4.5% 1.5%
Monthly Pay $1,798.65 $1,520.65 $-278.00
Total Payments $539,595.00 $456,195.00 $-83,400.00
Total Interest $260,431.82 $182,615.08 $-77,816.74
Points Equivalent To $5,583.26
Cost + Points (Upfront) $6,583.26
Time to Recover Cost/Point 23.68 months

There was an error with your calculation.

Table of Contents

  1. What Refinancing Means
  2. Application of Refinancing
  3. Refinancing Specific Types of Loans
    1. Refinance Mortgage Loans
    2. Refinance Car Loan
    3. Refinancing Personal Loans
    4. Refinancing Student Loans
    5. Refinance Credit Card Loans
  4. The Examples of Refinance Calculations
    1. Mortgage Refinance
    2. Student Loan Refinance
    3. Car Loan Refinance

Refinance Calculator

The refinance calculator is the perfect tool to tell you how much refinancing can help you save or spend. The best part about the refinancing calculator is its easy use. Plug in your specific numbers hit the 'calculate' button, and your results will appear.

Most of the time, refinancing is a money-saver for borrowers. However, before shopping around for lenders, it's a great idea to crunch the numbers. So you will ensure that refinancing your loan will help you snag a lower rate and save money over the life of your loan.

What Refinancing Means

Refinancing is the process of revising a loan to replace the terms of an existing agreement. This usually applies to loans and mortgages. And when borrowers apply for refinancing, they usually do it to change the terms in their favor.

For example, this can include the payment schedule, interest rate, or other terms outlined in a loan contract. If the refinance application is accepted, the borrower is issued a new loan contract that replaces the original agreement.

Borrowers typically take advantage of the refinance process when significant fluctuations have affected interest rates or the potential savings are worth it.

Here are the key takeaways you should know:

  • Refinancing occurs when an existing loan is restructured to change the payment schedule, interest rate, etc.
  • Most borrowers seek to refinance when interest rates drop.
  • Common consumer loans that are refinanced include auto, student, and home loans.

Application of Refinancing

As we mentioned, consumers usually look to refinance certain types of debt obligations to get better borrowing rates, such as after economic conditions change. For example, in terms of home loans, owners will refinance homes and switch between mortgage types such as adjustable-rate mortgages and fixed-rate mortgages. The most common goal among these borrowers is to reduce the amount of interest paid over time, thus reducing your overall debt obligation.

However, borrowers will also refinance after their credit score has increased, they made changes to their financial planning strategy or paid off the existing debt by consolidating it into one lower-priced loan.

Still, the most common reason for refinancing a loan is a change in interest rates. The economic cycle, National monetary policy, and competition are all factors that can cause interest rates to decrease or increase. Since these rates are cyclical, most people refinance when rates decline.

These rates can affect borrowing rates across every type of credit product, including revolving credit cards and non-revolving loans. In an environment with rising rates, borrowers with variable rates pay more interest charges. The reverse is true when the rates are falling.

To begin the refinance process, the borrower must approach a new lender or their existing one to make a request and complete an application. Refinancing generally involves taking a closer look at the person's financial situation and credit terms.

It's common for businesses to seek refinancing for commercial properties and loans. Many business leaders begin by evaluating their company balance sheet for loans issued by creditors that can benefit from improved credit or lower rates.

Refinancing Specific Types of Loans

Regardless of the loan type, there are specific steps to follow when refinancing with each type.

Refinance Mortgage Loans

The first step to refinancing your home loan is to choose the type of loan you want since this is the perfect time to change the terms. For example, if your current mortgage is a 30-year loan, you'd rather have a 15 or 20-year loan. While loans with shorter terms generally have higher monthly payments, the interest paid over the loan will be lower.

After choosing the loan type, it's time to compare rates and terms with different lenders. Shopping around for the lowest mortgage refinance rates will save you money. Beginning with your current lender will also save time.

Once you've chosen a lender, you will complete a new mortgage application. This process will be very much like the process you went through to obtain the first loan. The lender will want to know about your income, debts, and assets. You may also need to supply documents, including pay stubs, bank statements, or other paperwork.

Another crucial part of the refinance process is having your home appraised, which will tell the lender what the home is worth for the underwriting process. You may not be required to do this when seeking a government loan.

The final step is to seal the deal and sign the paperwork for your new loan. Just don't forget to ask your lender if you can pay an extra fee to lock in your rate. This is especially helpful when interest rate hikes are anticipated.

Refinance Car Loan

Deciding when or if you should refinance a car loan is a bit more complicated because these loans are usually shorter-term. Regardless, if you have experienced financial improvement or interest rates have dropped since you obtained your original auto loan, it may be worth looking into refinancing.

Just be sure to shop around and determine which lender offers the best savings. Of course, check with your current lender, but consider credit unions or banks where you already do business. Many online options, such as RefiJet and Caribou, also cater to clients with less-than-perfect credit.

It's worth noting that before you choose to refinance your car loan, it may be best to improve your credit score first. The best credit rates are for those with good or excellent credit rates. A higher score can mean the difference between a 3 percent rate and a 19 percent rate.

Here are some great ways to improve your overall credit score:

  • Pay all bills on time.
  • Get any past-due bills current.
  • Apply only for credit you need.
  • Don't close accounts.
  • Reduce current credit card debt to 30 percent or less of your credit line.

But remember, there are other options if you use the refinance calculator and find that the refi process will cost you money. Here are some other excellent options:

  • Trade-in the vehicle.
  • Defer Payments.
  • Request a loan modification.
  • Adjust your budget as needed.

Refinancing Personal Loans

There is collateral involved when you choose to refinance mortgage or auto loans. Still, when refinancing personal loans, the process is a bit different.

Shopping around and ensuring that the new loan is preferable to the existing loan is paramount. So, you should first begin identifying areas where you can improve your credit score, as this will ensure you receive the best interest rates.

After choosing a few lenders:

  • Compare and calculate all costs involved in the refi process.
  • Look at your existing terms to see how much it costs to pay off the loan early.
  • If this amount is minimal, go ahead and proceed.

At this point, you'll begin the loan application process. If approved, you'll be issued a check from your new lender that will need to be used to pay off the old loan. We also suggest you spend additional money on the new loan to help you pay it down a bit.

Refinancing Student Loans

Both types of student loans - federal and private - can be refinanced. Refinancing student loans means you take out one larger loan to pay off the smaller student loans. And depending on your current finances and lender, you may be able to get a big enough loan to consolidate all of them into one monthly payment.

Just beware that refinancing student loans requires the borrower to have good credit. If you don't meet the income and credit criteria to refinance your student loans, you may opt to find a co-signer.

Finding a co-signer can be challenging. Not every lender allows co-signers on student loans, and it may be hard to convince someone to take responsibility for your education debt.

And while refinancing student loans can lower your monthly payment and interest charges, it's not the best option for everyone. The other thing to know is that when you refinance student loans, you lose access to federal programs and benefits associated with federal student loans. This may hurt if your financial situation changes and you need a deferral or are looking for student loan forgiveness.

So, before making any major decisions about student loan refinancing, it's best to take your time and investigate if federal or private loans are best for your needs. Ultimately, suppose you want to have the option to apply for government assistance with your loans in the future. In that case, it's not wise to refinance.

Refinance Credit Card Loans

Credit card refinancing is a fancy way to explain paying off high-interest cards quicker to pay fewer interest charges. This refinancing type comes in many forms, but all methods are meant to lower interest rates on credit cards with higher interest charges that you've accumulated.

To accomplish this, many people weigh their options between credit card consolidation or refinancing. The most common options include personal loans, balance transfer cards, home equity loans, or taking from retirement accounts. Typically, the best option depends on your current debt load, credit history, credit score, and current finances.

And while both of these methods will work effectively to reduce credit card debt, you'll have to weigh your options.

First, it's vital to understand that debt consolidation requires you to get a lower interest loan and use it to pay off the higher interest cards. This loan may be secured where you have to put up an asset or be unsecured using no collateral.

Refinancing credit cards involves transferring the high-interest debt to a new card that offers a larger credit limit and zero-interest balance transfer options. While these options are ideal for some people, they may not work for others.

The most important thing is your current financial situation. If your finances are solid but you don't want to keep throwing money away, then you should go for it. However, suppose you struggle to meet monthly payments or have bad credit. In that case, you may want to improve your overall score before exploring options.

The Examples of Refinance Calculations

Using the refinance calculator for the first time may be a bit daunting. So let's look at some practical examples:

Mortgage Refinance

Let's say you currently have a 20-year, 6% fixed-rate mortgage on your home for $300,000 but want to refinance at a 4% rate. Using the refinance calculator, you'll find that this process will decrease your monthly mortgage from $2,149.29 to $1,817.94.

This is a monthly saving of over $330. And assuming that your tax rate is 22%, the after-tax rate is at 0.78, which means that after taxes, you are saving $258.45 per month. The final step is to factor in the cost of refinancing. So, let's say that's at $9,000. At this cost, it will take you almost 35 months to recoup the refinance cost.

Student Loan Refinance

Student loans can be more challenging to calculate. So, let's say you own $50,000 at a 12% interest rate over a 10-year term. This means in those 10 years, you'll be responsible for over $36,000 in interest.

However, suppose you refinance the $50,000 at a 6% interest rate over 10 years. In that case, you'd only have to pay an estimated $16,600 over the life of your loan. This means your total savings would be over $19,000.

Car Loan Refinance

To give you an example of a car loan refinance, let's consider you purchased a new $25,000 car at 7% interest over 60 months, with an estimated monthly payment of $495. This means the total cost to finance the car is $29,702.

However, you have the opportunity to refinance the auto loan a year later. The new loan would be $20,673 at 5% over 48 months, with an estimated monthly payment of $476. The total cost to finance this loan would be $22,852, meaning the savings of refinancing your auto loan would be $2,552 in total.