Refinancing is an attractive option to many borrowers. This is especially true when the market rates are currently lower than the rate on your existing loan, or if you have an adjustable rate mortgage and want to move to the stability of a fixed rate mortgages.

There are many other good reasons for wanting to refinance. One of these is to consolidate your debts or to make home improvements. This works by borrowing more than your current balance and applying the extra money to pay off debts or pay for the improvements you seek. Another valid reason for seeking a refinance is to shorten the term of your repayment along with the lower interest rate you will receive.

Using an online refinance calculator can help you decide if this is the ideal time to refinance. Most calculators will require you to enter the monthly payment amount on your current loans, the amount of the new loan you are seeking, your new interest rate, the new loan’s term, and the estimated closing costs for the loan.

After you have entered this information, the calculator will tell you several numbers that can be useful in deciding whether refinancing now is right for you. The first is the new monthly payment for your refinance loan. The second is the monthly savings from refinancing. The third is the amount of time it will take you to break even from the transaction. After this period is over, you will start saving money from your refinance.

Note: The calculator does not take into account the savings from not having to pay high interest rates on debt paid off through the refinance, such as credit card debt. The monthly savings number only compares your new mortgages monthly payment to your old monthly payment. Similarly, the break even period only accounts for comparisons between the two mortgages.

For this reason, the calculator is much more useful for those wishing to refinance to get a lower interest rate or to reduce their payment term. In any case, it is good to know how long it will take you to break even from your refinance and the difference in monthly payments after the refinance goes into effect.