Refinancing a loan—especially a mortgage—can be one of the most strategic financial moves for homeowners looking to reduce their interest rates, shorten loan terms, or tap into home equity. However, navigating the numbers can feel overwhelming without the right tools. That’s where the Bankrate Refinance Calculator comes into play.
How to Use the Bankrate Refinance Calculator
Using this tool is simple and requires only a few key pieces of information. Here's how you can use the calculator effectively:
Step-by-Step Instructions:
- Enter your current loan details:
- Original loan amount
- Interest rate
- Loan term (in years)
- Months already paid or time left on your current mortgage
- Input the new loan details:
- Refinance amount (usually the remaining balance)
- New interest rate
- New loan term (in years)
- Closing costs (if any)
- Click “Calculate”
The calculator will instantly display:- New monthly payment
- Monthly savings
- Total interest saved over time
- Break-even point (when the savings offset refinancing costs)
- Review and compare
Analyze whether the refinance option makes sense for your long-term financial goals.
Key Formulas Used in Refinance Calculation
The calculator is based on the following financial formulas:
1. Monthly Mortgage Payment (PMT) Formula:
PMT = P × r(1 + r)^n / [(1 + r)^n – 1]
Where:
- P = loan amount (principal)
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of payments (loan term in months)
2. Interest Savings:
Total Interest (Old Loan) - Total Interest (New Loan)
3. Break-Even Point:
Break-Even = Closing Costs ÷ Monthly Savings
This formula tells you how many months it will take for your savings to exceed the cost of refinancing.
Example Calculation
Let’s walk through an example using the Bankrate Refinance Calculator:
- Original Loan: $300,000
- Original Interest Rate: 5%
- Loan Term: 30 years
- Time Passed: 5 years
- Remaining Balance: ~$275,000
- New Refinance Interest Rate: 3.5%
- New Loan Term: 25 years
- Closing Costs: $3,000
Output from Calculator:
- New Monthly Payment: $1,376
- Old Monthly Payment: $1,610
- Monthly Savings: $234
- Total Interest Saved: $32,000+
- Break-Even Point: 13 months
This shows that if the homeowner stays in the home for more than 13 months, refinancing would save money in the long term.
Why Use the Bankrate Refinance Calculator?
There are many reasons borrowers use this tool before refinancing:
- Accurate Financial Forecasting: Understand real-time savings before committing to a new loan.
- Smart Comparison: Compare multiple refinancing offers and find the best deal.
- Goal Setting: Whether reducing monthly expenses or paying off a loan faster, this tool aligns numbers with your financial goals.
- Time Efficiency: No need to manually crunch numbers or consult a financial advisor for preliminary analysis.
Advantages of Using This Calculator
- User-friendly interface
- Instant results
- Supports multiple loan structures
- Helps visualize break-even point
- Makes informed decisions easier
When Should You Refinance?
Here are common situations when refinancing may be beneficial:
- Interest rates have dropped significantly since you took out your original loan.
- Your credit score has improved, qualifying you for better terms.
- You want to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
- You want to shorten your loan term (e.g., from 30 years to 15 years).
- You need to tap into your home’s equity for other financial needs.
Things to Consider Before Refinancing
While refinancing can be advantageous, it’s essential to consider:
- Closing Costs: These can include appraisal fees, title insurance, and more.
- Loan Term Extension: You might pay less monthly but more over time if you extend your loan.
- Prepayment Penalties: Some lenders charge fees for paying off a loan early.
- Credit Requirements: Your credit score still impacts your eligibility and rate.
20 Frequently Asked Questions (FAQs)
1. What is refinancing?
Refinancing is replacing your existing loan with a new one, typically to secure better terms.
2. Is refinancing worth it?
Yes, if your new interest rate is significantly lower or you want to change your loan terms.
3. What does the refinance calculator show?
It shows your new payment, total interest savings, and how long it will take to break even on costs.
4. How accurate is the Bankrate Refinance Calculator?
It’s highly accurate for estimates but consult a lender for exact figures.
5. Do I need my credit score to use the calculator?
No, but a good credit score helps qualify for better refinance rates.
6. Can I refinance with bad credit?
It’s possible, but you may not get favorable terms.
7. What is a break-even point in refinancing?
It’s when the monthly savings from refinancing exceed the closing costs.
8. How do I find my current mortgage balance?
Check your latest loan statement or contact your lender.
9. Are there fees involved in refinancing?
Yes, including closing costs, appraisal fees, and lender charges.
10. How often can I refinance?
There’s no limit, but it should make financial sense each time.
11. Will refinancing hurt my credit?
It may cause a small, temporary dip due to a credit check.
12. What’s the best time to refinance?
When interest rates drop or your financial situation improves.
13. Can I refinance to a shorter loan term?
Yes, which can save you money in total interest paid.
14. How do I use the refinance calculator for investment properties?
The same way as for personal homes—just input the correct values.
15. Should I include closing costs in my refinance amount?
You can, though it increases the loan balance.
16. Does the calculator account for taxes or insurance?
Usually no—it focuses on principal and interest payments.
17. Can I refinance with the same lender?
Yes, but shop around for the best rates.
18. What’s a good refinance rate in 2025?
It depends on the market, but anything below your current rate may be worth exploring.
19. Can I use this calculator on mobile?
Yes, the tool is mobile-responsive for ease of use on any device.
20. Is refinancing tax-deductible?
Mortgage interest may still be deductible; consult a tax advisor.
Final Thoughts
The Bankrate Refinance Calculator is a powerful, user-friendly tool that empowers borrowers to take control of their finances. By providing clear insights into monthly savings, total interest saved, and break-even periods, it helps users make informed decisions about whether refinancing is the right move.