Refinancing your home mortgage has the potential to save you thousands over the course of your home loan. However, in some instances, refinancing to get a lower interest rate may end up costing you more than you expect.
The only way to figure out if refinancing your mortgage is worth it is to roll up your sleeves and do the math. We built the Mortgage Refinance Calculator to help homeowners see if refinancing a home is right for them.
Fill out both your current loan information and the specifics of the new loan. The calculator will show you the differences in the monthly payments and the outstanding interest on both loans.
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Taking out a new mortgage to replace your existing mortgage is called a refinance. People refinance for many reasons, but the most popular is to get a new loan with a lower interest rate. This lower refinance rate can save some homeowners thousands in interest payments. Others may refinance to replace their adjustable-rate mortgage with a fixed rate or lengthen their loan term to lessen the monthly payment burden.
Even in a competitive refinance market, saving money is not a guarantee. If you’re not careful, you may end up spending more money than you save. This is why it’s important to sit down with a lending officer prior to refinancing. Speaking to someone who understands both your existing loan and the current market will ensure you are making the right financial decisions.
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This is the amount of money that you still owe to the bank. Keep in mind that the loan amount is not the home’s purchase price or even what it’s worth now; it is only the amount remaining on your current mortgage.
You are most likely making one monthly payment for your mortgage, but that payment is made up of four components: principal, interest, taxes, and insurance. In this field, please enter only what you are paying for principal and interest each month. If you have a hard time finding that number, your mortgage statement or lender can help you.
The interest rate, sometimes referred to as the loan rate, is what a lender charges you in exchange for being able to borrow their money. It’s calculated as a percentage of your total loan amount and added to the loan’s principal balance.
With mortgages and other types of loans, interest compounds, meaning that you’ll end up paying more than just X% on the total loan amount. Say you have two loans for the same amount with the same interest rate, but one has a 15-year term and the other a 30-year term. Because you are borrowing over a longer period with the 30-year loan, the interest has more time to compound, meaning you’ll pay more interest over time.
This varies per situation. Some people take out a new mortgage for the amount they owe on the home, and some opt for a larger mortgage to take advantage of their home’s equity (a cash-out refinance).
Refinances are typically undertaken when you can get a lower interest rate. If you’re looking to save on interest and have a lower mortgage payment, make sure your new interest rate is lower than your current one.
Because a refinance is a new mortgage, you have the opportunity to change your loan term. Maybe you have an existing 30-year loan, but you’d like to shorten the loan term to 15 years. Now is the time to do it!
A mortgage refinance is a brand-new loan, which means that there are closing costs involved. You can expect to pay anywhere from 2-6% of your new mortgage amount. You’ll be responsible for:
Are you rolling your closing costs into your new mortgage? Select “yes”. If you’re paying in cash, select “no”.
The most important factor in all of this is simple: does it fit with your financial goals? Whether you’re not sure where to start with your budget or you’re looking for tips to level up your financial journey, you can check out our blog posts on Money Management for more helpful articles! We want to provide you the kind of financial advice you need to accomplish your goals.
This calculator is for illustrative purposes only and based on information provided by the user. Accuracy is not guaranteed. All loans are subject to approval. Your actual rate, terms and fees may vary. Your Monthly Payment calculations reflect only principal and interest, and amounts for taxes and insurance, if applicable, may increase your actual payment.
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