1. What is the Net Savings Equation?

The Net Savings Equation calculates the overall financial benefit from refinancing a mortgage by considering old payments, total costs, and accumulated monthly savings over time.

2. How Does the Calculator Work?

The calculator uses the Net Savings equation:

Where:

• \( NS \) — Net Savings ($)
• \( OP \) — Old Payments ($)
• \( TC \) — Total Costs ($)
• \( MS \) — Monthly Savings ($)
• \( M \) — Months (unitless)

Explanation: The equation calculates the net financial benefit by subtracting total costs from old payments and adding the accumulated monthly savings over the specified period.

3. Importance of Net Savings Calculation

Details: Calculating net savings is crucial for making informed decisions about mortgage refinancing, helping homeowners determine if the financial benefits outweigh the costs involved in the refinancing process.

4. Using the Calculator

Tips: Enter old payments in dollars, total costs in dollars, monthly savings in dollars, and number of months. All values must be valid (non-negative numbers).

5. Frequently Asked Questions (FAQ)

Q1: What exactly are "old payments" in this context?
A: Old payments refer to the total amount you would have paid on your original mortgage during the period being analyzed.

Q2: What costs should be included in "total costs"?
A: Total costs should include all refinancing-related expenses such as closing costs, appraisal fees, and any other associated charges.

Q3: How do I calculate monthly savings?
A: Monthly savings is the difference between your old monthly mortgage payment and your new monthly payment after refinancing.

Q4: What time period should I use for months?
A: The time period should reflect how long you plan to stay in the home or keep the mortgage to accurately capture the savings benefit.

Q5: Is a positive net savings always good?
A: While positive net savings indicates financial benefit, you should also consider other factors like cash flow impact and long-term financial goals.