1. What is the Mortgage Refinance Formula?

The mortgage refinance formula calculates the fixed monthly payment required to fully amortize a loan over its term. It's based on the loan amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( P \) — Monthly payment ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( PV \) — Loan principal amount ($)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula accounts for both principal and interest payments over the life of the loan.

3. Importance of Refinance Calculation

Details: Calculating refinance payments helps borrowers compare loan options, determine affordability, and understand long-term financial commitments.

4. Using the Calculator

Tips: Enter loan amount in dollars, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does refinancing save money?
A: Refinancing can lower monthly payments by securing a lower interest rate or extending the loan term, though the latter may increase total interest paid.

Q2: What's included in a mortgage payment?
A: This calculation shows principal and interest only. Actual payments may include taxes, insurance, and PMI if applicable.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms lower monthly payments but increase total interest.

Q4: When does refinancing make sense?
A: When interest rates drop significantly, when improving credit score, or when needing to change loan terms.

Q5: Are there refinancing costs?
A: Yes, typically 2-5% of loan amount. These should be factored into break-even calculations.