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Interest Savings Formula:
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Refinance interest savings represent the amount of money you can save by switching from your current loan to a new loan with better terms. It calculates the difference between the total interest you would pay on your existing loan versus the total interest on a new refinanced loan.
The calculator uses a simple formula:
Where:
Explanation: This calculation shows the actual monetary benefit of refinancing by comparing the total interest costs between your existing and potential new loan.
Details: Calculating interest savings helps borrowers make informed decisions about whether refinancing is financially beneficial. It provides a clear picture of potential savings and helps evaluate if refinancing costs are justified by the interest savings.
Tips: Enter the total interest amounts for both your current loan and the proposed refinanced loan. Ensure both values are in the same currency and represent the full interest cost over the loan term.
Q1: What costs should I consider beyond interest savings?
A: Consider refinancing fees, closing costs, and any prepayment penalties from your current loan to get a complete picture of net savings.
Q2: Does this calculator account for different loan terms?
A: This calculator compares total interest amounts regardless of loan term. Ensure you're comparing interest over the same time period for accurate results.
Q3: Should I refinance if I have a small interest rate difference?
A: Even small rate differences can lead to significant savings over time, but you must weigh these against refinancing costs.
Q4: How accurate are these savings calculations?
A: The calculation is mathematically precise for the inputs provided, but actual savings may vary based on early repayments or changes in terms.
Q5: When is the best time to refinance?
A: The best time is when interest rates have dropped significantly below your current rate, and you plan to stay in the property long enough to recoup refinancing costs.