How Much Will I Save by Refinancing
The most common reason to refinance is to save money. Naturally, one of the most common questions then is how much you’ll save by refinancing.
Every situation is different, but let’s run through a couple of scenarios just so you have things to think about. You can put in your own numbers with our refinance calculator.
Let’s say you wanted to pay off your mortgage faster and had $200,000 left on a home worth $250,000. You have 20 years left on your term and want to pay off your home faster. You have excellent credit.
You could refinance into a 15-year conventional fixed mortgage at an interest rate of 3.75% (4.227% APR) and have a monthly payment of $1,454.45. There are $7,057 in closing costs. However, by paying those closing costs and getting that rate you save more than $40,000 in interest.1
On the other hand, if you were to lengthen your term to lower your payment, you would save every month, but you would end up paying more in interest. It doesn’t work this way in the real world, but let’s keep everything the same except the term. If you had a 3.75% interest rate on a $200,000 loan, because the term is longer, you pay about $30,000 more in interest. In reality, this number is higher because a longer-term loan also means a higher interest rate.