1. What is the Mortgage Rate Drop Calculator?

This calculator determines how much you'll save monthly when your mortgage rate drops by comparing your old and new monthly payments.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• \( M_{old} \) — Your current monthly mortgage payment
• \( M_{new} \) — Your new monthly mortgage payment after rate drop
• \( \Delta M \) — Monthly savings from the rate reduction

Explanation: The equation simply subtracts your new payment from your old payment to show your monthly savings.

3. Importance of Calculating Payment Changes

Details: Understanding your potential savings helps evaluate whether refinancing makes financial sense after accounting for closing costs and break-even points.

4. Using the Calculator

Tips: Enter both your current monthly payment and estimated new payment after the rate drop. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I include taxes/insurance in these payments?
A: No, use only the principal and interest portions for accurate comparison of rate changes.

Q2: How do I get my new payment amount?
A: Your lender can provide this, or use a mortgage calculator with the new rate and remaining terms.

Q3: Does this account for resetting the loan term?
A: No, this assumes same remaining term. For extended terms, the savings calculation changes.

Q4: What's considered a significant rate drop?
A: Typically 0.75%-1% or more, but depends on closing costs and how long you'll stay in the home.

Q5: How does this relate to APR?
A: APR includes fees; this calculator focuses purely on monthly payment changes from rate differences.