Should I refinance?

When you refinance at a lower interest rate, you usually pay refinancing costs including points, fees, and closing costs. This calculator will tell you if the amount you save in interest will exceed these refinancing costs. The calculated results depend on how long you plan to keep this property. Your income tax is used to compute any tax advantage/disadvantage to the refinance. Even your "oportunity cost" for cash out-of-pocket is figured using your savings rate. Remember, if you choose not to refinance then you could be earning interest on the fees you would have paid. This helps keep the refinance comparison fair.


Be sure to look at the Chart...

You'll need to check the "Chart" box and hit "Calculate" to see it. Pay particular attention to the chart's "Break Even Point". This is where the cost to refinance matches what you've saved in interest (for refinancing at a lower rate). If you'll never recoup your losses, this line may not appear.


Check out the Financial Details...

The bold answer is nice, but the table below it lists the details.


Tips for the astute...

In this analysis, cash out is not considered as part of the cost of the loan since the cash could theoretically be put back into the loan.

Your tax rate is used to calculate the monthly advantage of your interest deduction. If you wish not to include the interest deduction advantage, you may set your tax rate to 0. Please keep in mind that your tax deduction may be limited beyond the scope of this calculator. Talk to your tax advisor before using these results in your specific situation.

The total loan cost figure is actually the present value of all the payments for as long as you keep this property, using the investment rate of return as a discount rate. You may also think of it as the amount you would have to invest today (e.g., in a savings account) to cover all the payments for as long as you keep this property. Negative savings are indicated by brackets.


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