Calculateur de Refinancement — Formule

When Refinancing Makes Sense

Refinancing replaces your current mortgage with a new one, usually at a lower rate. The question is whether the interest savings outweigh the closing costs. A typical refi costs $3,000-$6,000 in fees. If the new rate saves you $200/month, you break even in 15-30 months. If you plan to stay in the home longer than that, refinancing pays off.

The Formula

Monthly Savings = Old Payment - New Payment Break-Even Months = Closing Costs / Monthly Savings

The new payment is calculated using the same amortization formula as a mortgage: P * [r(1+r)^n] / [(1+r)^n - 1], but with the remaining balance as principal and the new rate and term.

When to Use This

When rates have dropped at least 0.5-1% below your current rate, or when your credit score has improved significantly since you got the original loan. Also useful when switching from an adjustable-rate mortgage to a fixed rate for predictability.

What Most People Miss

Refinancing restarts your amortization schedule. If you're 10 years into a 30-year mortgage and refinance into a new 30-year mortgage, you just extended your total payoff to 40 years. Even with a lower rate, you might pay more total interest over the life of the loans combined. Consider refinancing into a 20-year term instead to avoid this trap.

The Rate Drop Isn't Everything

Closing costs vary wildly. Some lenders offer "no-cost" refinances but build the fees into a slightly higher rate. Compare the total cost over your expected time in the home, not just the rate. A 5.5% refi with $2,000 in costs beats a 5.25% refi with $8,000 in costs if you're moving in 5 years.

Common Mistakes

  • Refinancing repeatedly. Each refi has closing costs and resets amortization. Refinancing every time rates drop 0.25% usually loses money.
  • Cashing out equity to pay off credit card debt, then running the cards back up. You've converted unsecured debt into debt secured by your home.
  • Not shopping multiple lenders. Rates and fees vary significantly. Get at least 3 quotes on the same day (rates change daily).

    • Exemple Résolu

    You owe $250,000 at 7% with 25 years remaining. You can refinance at 5.5% for 30 years.

    1. Current monthly payment: $250,000 at 7% for 25 years = $1,767.63
    2. New monthly payment: $250,000 at 5.5% for 30 years = $1,419.47
    3. Monthly savings: $1,767.63 - $1,419.47 = $348.16
    4. Current total remaining cost: $1,767.63 * 300 = $530,289.00
    5. New total cost: $1,419.47 * 360 = $511,009.20