1. What is Mortgage Payment Reduction?

The mortgage payment reduction (ΔM) calculates the difference between your old monthly payment and new monthly payment after a rate reduction or refinancing. It shows how much you'll save each month.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( \Delta M \) — Monthly payment reduction
• \( \text{Old M} \) — Original monthly payment
• \( \text{New M} \) — New monthly payment after rate change

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

3. Importance of Payment Reduction Calculation

Details: Understanding your potential monthly savings helps evaluate whether refinancing makes financial sense when interest rates drop.

4. Using the Calculator

Tips: Enter both your original monthly payment and your new estimated payment after rate reduction. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I include taxes and insurance in these amounts?
A: For accurate comparison, either include them in both amounts or exclude them from both amounts.

Q2: How much reduction makes refinancing worthwhile?
A: Typically, a reduction of 0.5%-1% in interest rate or $100+ monthly savings justifies refinancing costs.

Q3: Does this account for refinancing costs?
A: No, this only calculates monthly payment difference. You'll need to calculate break-even point separately.

Q4: What if my loan term changes?
A: This calculator assumes same remaining term. For term changes, use a full refinance calculator.

Q5: How often can I refinance?
A: Technically as often as you want, but typically only makes sense when rates drop significantly.