Stop guessing and find the mortgage rate that makes refinancing worthwhile

House and calculator atop $20 bills

We have a pretty good refinancing calculator that can help anyone decide whether to replace their mortgage.

You just plug in some basic info about the home loan you currently have and any offer for a new loan, and it figures out how much you stand to save in interest payments and how long it would take to recoup the cost of refinancing your mortgage.

Ideally, you should save enough with your new payments to recoup all of your up-front costs in less than a year.

Two years or more is too long and indicates that you're paying too much for the interest rate you're being offered.

But there's another calculator we like at the National Bureau of Economic Research that takes a slightly different approach to helping you decide whether to refinance.

The equation it uses was created by three economists from the Federal Reserve Board, the Federal Reserve Bank of Chicago and Harvard University.

Their calculator assumes users aren't sure how low interest rates need to be to make refinancing worthwhile, and it doesn't require you to have a new home loan to compare against your old home loan.

It simply asks how much you owe on the mortgage, the length of time left on the mortgage, how long you plan to be in the home and what estimated points and closing costs you'd be willing to pay on a refi.

They also ask for some advanced stats, but you don't need to change the ones provided if you're looking for a ballpark figure.

What the NBER calculator provides is an interest rate that would make refinancing worthwhile.

Think of it as a target mortgage rate to look for when searching for a refinancing deal.

Any home loan that beats that rate will save enough money to make a new mortgage the right move.

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