Do you want to know how refinance calculators save you money? When refinancing a mortgage, the numbers are crucial. Borrowers may save money by obtaining a reduced interest rate, reducing their monthly payments, reducing the loan length, or eliminating the need for mortgage insurance premiums. Make sure refinancing your current home loan will save you money by doing the math before you start looking at lenders. We’ll let you know how much you could save.
How Refinance Calculators Works
If you refinance your mortgage, how much interest can you save? You can find out more about it by using the refinance calculator. Enter the details of your existing mortgage, including the new loan term, rate, closing costs, and your current appraised value. You can use the calculator to determine if you should refinance your mortgage and how much interest you can save. It will also determine how long your lower monthly payment will take to cover closing costs.
Calculated values are instantly available for the output values displayed when any value changes in the following form fields.
Mortgage Refinance Calculator Usage Instructions
Before starting, you must know a few details about your mortgage. Estimating is acceptable, but actual data will yield more accurate results. You can phone your mortgage lender or look them up on a recent mortgage statement.
Enter your current loan information first. You can consult your outstanding loan balance or the specifics of your initial loan; the following is required for each:
Remaining Loan Balance | Original Loan Details |
Total balance remaining | Original loan term, in years |
Interest rate | Original loan amount |
Monthly payments | Interest rate |
Remaining term, in years and months |
After that, enter the details of your new loan. Here’s something to think about:
Loan Term
You can repay the loan quicker and with less interest if you refinance it for a shorter term. Your monthly payments, however, can increase based on your new interest rate. Refinancing the same number of years left on your existing loan is another option.
Interest Rate
Use our default to get the average rate for today, or view the current mortgage refinance rates.
Points
Paying an optional upfront fee can lower your interest rate over time. Find out when it is worthwhile to pay for mortgage discount points.
Fees
You will have to pay closing expenses like a buy mortgage. Usually, closing expenses range from 2% to 6% of the loan balance.
Cash-out Amount
Another way to access your home equity is to obtain a new, larger loan. Find out if you should get a cash-out to refinance.
How to Interpret the Refinance Calculator’s Results
A side-by-side comparison of your new loan and your existing loan will be displayed in your results. Three essential details are visible at the top:
Monthly Payment
You will pay The principal and interest, either more or less.
Loan Lifetime
Based on your new interest rate, you will save (or spend) the amount throughout the loan.
Breakeven Period
The refinance breakeven point is the time it will take for savings to offset upfront expenses. If you sell the house before this date, the cost of your refinance will not be recovered.
Reasons To Use Mortgage Refinance
There are several reasons why homeowners choose to refinance their mortgages. Whatever your reason for refinancing, the outcome should improve your financial situation. Homeowners frequently decide to refinance their mortgages for the following reasons:
To Reduce Their Monthly Payments And Obtain a More Affordable Loan
This is the primary motivation for refinancing. There are two methods to get a better interest rate. One is if the homeowner’s financial situation has improved, as seen by a decreased debt-to-income ratio or an improved credit score. The second is whether overall mortgage rates have declined since the initial borrowing.
To Remove a Borrower From The Mortgage
Another reason to refinance is to remove your ex-spouse’s name from the loan, which can be done through a divorce. It could also be true if you purchased a house with a friend or family member. The individual refinancing the loan into their name must be eligible for the new loan based only on their employment, income, and credit. Remember that removing someone from a mortgage does not remove them from the home’s deed; instead, you may need to file a quitclaim deed (for advice, consult your state’s property laws).
To Move From An Adjustable-Rate Mortgage (ARM) To a Loan With a Fixed Rate
Before the ARM resets to a variable rate and payments become less reasonable or less predictable, borrowers who took out an ARM but intend to remain in their homes might wish to refinance into a more stable, fixed-rate loan.
To Pull Out Money
You can borrow against your home equity or ownership stake with a cash-out refinance to get quick cash. You take the difference in money and replace your current mortgage with a larger one.
To Eliminate FHA Mortgage Insurance
Once you have 20% equity in your house, you can refinance into a conventional mortgage to stop paying annual mortgage premiums for borrowers with Federal Housing Administration-insured loans, also known as FHA loans.
Things to think about before refinancing
Although refinancing might make sense, several variables will determine how wise the choice is.
How much does it cost to break even?
When you break even on your expenses, it is crucial to consider when choosing whether to refinance a mortgage. By totaling up all of the closing expenses associated with a refinance and calculating the number of years it will take you to cover those costs with the savings from your new mortgage payment over your old one, you can determine the break-even point. Refinancing makes more sense if you want to remain in your house over the break-even point; otherwise, you risk losing money.
How long do you plan to remain in your house?
Consider how long you intend to stay in your house before refinancing. Even if you have a lower interest rate, refinancing if you want to relocate in a few years may not be financially advantageous because you might need more time to cover closing fees. Most experts advise staying in your home for at least two to five years following a refinance, but you should determine what makes the most sense for you by performing your break-even analysis.
What is The Cost of Refinancing a Mortgage?
Although refinancing has upfront costs, it can ultimately save you money. The same expenses you paid when you initially purchased your house are typically included in a refinance, including:
- Lender fees, such as mortgage points, loan origination fees, and an application fee
- Third-party expenses, including a credit check, document recording, and appraisal fee
- Insurance costs and title search charges
- Escrow fees for homeowners insurance and property taxes
The increased loan amount, credit score, debt-to-income ratio, loan program, and interest rate will affect closing costs. According to Freddie Mac, the typical closing costs for a refinance are approximately $5,000, although the exact amount can vary significantly based on the property’s location, the mortgage’s size, and the home’s value.
If you want to know more about other loans, explore this: Conventional Loans vs. Jumbo Loans: Key Differences and Benefits
It is worth your time and effort to compare lenders and choose one that offers the lowest costs and a competitive interest rate. Refinancing can cost thousands of dollars, so be sure you will benefit financially from it and remain in your house long enough to pay back the costs.
Conclusion
It’s time to look around for a refinance lender if you’ve calculated the numbers using our home refinance calculator and determined that refinancing makes sense. To compare refinance rates and terms, check with your current mortgage servicer, national banks, credit unions, internet mortgage lenders, and perhaps a mortgage broker.
Verify that all information, including fees and interest rates, is provided in writing. A loan estimate that contains your new loan information and all associated costs will be sent to you by the lender. Loan estimates are excellent for comparing lenders to get the best idea of which will support your refinance objectives.
FAQs
When is refinancing a good idea?
Generally speaking, before you should think about refinancing your mortgage, one or more of the following requirements must be met:
- Interest rates on mortgages are declining.
- The market value of your house has increased dramatically.
- Less than ten years have passed since you started making payments on your initial 30-year mortgage.
How can I refinance my mortgage and consolidate my debt?
Homeowners who wish to combine high-interest debt can benefit from cash-out refinances. Consolidating debt lowers monthly payments because your mortgage interest rate is lower than that of credit cards or other bank loans.
Does refinancing need an appraisal of my home?
Yes, for the most part. However, depending on the situation, an appraisal might not be necessary.