Why do I want to know about refinance?
Here are some of the basic reasons to consider refinancing your loan
* Your current interest rate is higher by more than 1% of the current rates.
* You want to move from an adjustable to a fixed rate of interest.
* You want to cash in on the equity of your home to finance your children’s education or consolidate other higher interest debts.
* You may have another mortgage at a higher rate of interest.
* You plan to stay in this home for at least five years before moving.
* You want to make some renovation in the home for which you need cash.
Once you decide to refinance, consult a mortgage advisor about the best time to refinance. It may be advisable to wait until interest rates stabilize, instead of just rushing into a refinance.
How can a mortgage calculator help you refinance
A mortgage calculator can help you work out the savings in interest over the remainder of your first mortgage. You can compare savings with different interest rates from different lenders and choose a refinance loan with the least processing and closing costs. It saves you number crunching and you get results instantly. You can then decide on the refinance loan that offers you the best deal.
Options in refinancing are many. You can use a refinance under the rate and term system to repay your first mortgage. Under the scheme you can get up to 2% of the new loan amount as cash back or $2000, whichever is less. You can use a rate and term refinance to repay a second mortgage. You can use a refinance loan to save money on your earlier mortgage, if you are planning to live for more than three years in the same home. You can shift to a 15-year loan with a higher monthly outgo, but work out the benefits of doing so using the mortgage calculator before making any decision.
Illustration
Let us consider that the original interest rate is 6.5% for a 30-year loan of $250,000. Assuming you have 120 months or ten years left of this loan and the interest rate reduces to 6.25%. You can go for a refinance loan of $200,000, of 30 years at 6.25%. Using a mortgage calculator for the remainder of the loan amount of $139,623.21, your monthly payment works out to $1580.17 for the old loan and $1231.43 for the new refinance loan, giving you monthly savings of $348.74. This works out to a saving of $125544.84 if you take the refinance loan. All figures are indicative and may not reflect actual interest rates. For the current interest rates, you can use the mortgage calculator for refinancing the loan which is available at most financial websites.
The disadvantage of not using a mortgage calculator
Taking a refinance loan costs money and involves savings of thousands of dollars over the tenure of the loan. It will be foolish to ignore the potential savings gained by using a mortgage calculator. Hence, consult a reputed mortgage lender and use their mortgage calculator to go for a refinance today.
About the author:
John Lee is CEO and owner of the acclaimed online mortgage resource http://www.refinance-refinance.net. Join the thousands who use our FREE Mortgage Calculators everyday to find the answers to questions such as:
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