refinance Calculator

Mortgage Refinance Calculator: Determine If Refinancing Is Right for You

Refinancing your mortgage can be a strategic move to reduce monthly payments, secure a lower interest rate, or adjust your loan term. Our Mortgage Refinance Calculator is designed to help you assess whether refinancing aligns with your financial goals.

What is Mortgage Refinancing?

Mortgage refinancing involves replacing your existing home loan with a new one, typically to benefit from improved terms. Common reasons for refinancing include:

• Lower Interest Rates: Securing a reduced rate can decrease your monthly payments and the total interest paid over the loan's lifespan.

• Changing Loan Terms: Adjusting the length of your mortgage can help you pay off your loan sooner or extend payments for reduced monthly obligations.

• Switching Loan Types: Transitioning from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage can provide stability in your payments.

• Accessing Home Equity: A cash-out refinance allows you to tap into your home's equity for expenses like home improvements or debt consolidation.

Using Our Mortgage Refinance Calculator

Our user-friendly calculator enables you to estimate potential savings and determine the feasibility of refinancing. To use the calculator:

1. Input Current Loan Details: Enter your remaining loan balance, current interest rate, and the number of years left on your mortgage.

2. Enter New Loan Information: Provide the anticipated interest rate and desired loan term for the refinanced mortgage.

3. Include Estimated Closing Costs: Refinancing typically involves closing costs, which can range from 2% to 5% of the loan amount.

4. Review Results: The calculator will display your new estimated monthly payment, the difference from your current payment, and the time it will take to recoup the closing costs (break-even point).

Reasons to Refinance a Mortgage

• Reduce Monthly Payments: Lowering your interest rate or extending your loan term can decrease your monthly mortgage payments, freeing up cash for other expenses.

• Shorten Loan Term: Refinancing to a shorter term, such as from a 30-year to a 15-year mortgage, can increase monthly payments but reduce the total interest paid over the life of the loan.

• Eliminate Mortgage Insurance: If you've built sufficient equity, refinancing can help you remove private mortgage insurance (PMI) or transition from an FHA loan to a conventional loan without PMI.

• Get Cash: Refinance to a higher balance loan to cash out and use the money for various purposes.

Calculating Refinance Savings

To assess the value of refinancing:

1. Compare Monthly Payments: Evaluate the difference between your current and proposed payments.

2. Analyze Total Interest Savings: Determine how much interest you'll save over the life of the loan.

3. Consider the Break-Even Point: Calculate how long it will take to recoup the refinancing costs. For example, if refinancing saves you $200 per month and costs $6,000 in closing fees, your break-even point is 30 months.

Refinance Options

• Cash-out refinance: Cash out refinances allow homeowners to refinance with a new loan amount higher than the remaining balance, enabling them to withdraw the difference in cash for various uses, such as debt consolidation or home improvements.

• Rate and term refinance: Refinance the remaining balance for a lower interest rate and/or a more manageable loan term.

• Streamline refinance: A simplified refinance process for FHA and VA loans.

Refinance Costs and Fees

Closing fees vary depending on your location, loan type, loan size, and mortgage lender. Most lenders allow you to roll the closing costs of the refinance into the balance of your new loan increasing the total amount borrowed. Common refinance fees include origination fees, discount points and appraisal fees.

Understanding Monthly Payments

Your monthly payment includes principal and interest, property taxes, and homeowners insurance. Mortgage payments may also include escrow payments for property taxes, homeowners insurance, and mortgage insurance. Consider all aspects of your monthly payment when calculating your potential savings.

Loan Term and Interest Rate

A fixed-rate mortgage has a fixed interest rate for the entire loan term. An adjustable-rate mortgage (ARM) has an interest rate that may change periodically. Loan term refers to the period of time during which a loan must be repaid. A longer loan term may result in lower monthly payments, but you’ll pay more in interest over the life of the loan.

Tax Implications of Refinancing

Refinancing your mortgage can have several tax implications, both positive and negative. Consult a tax professional to understand how refinancing may impact your taxes. Here are some key points to consider:

• Mortgage Interest Deduction: One of the primary tax benefits of homeownership is the ability to deduct mortgage interest from your taxable income. When you refinance to a new loan with a lower interest rate, the amount of interest you pay—and thus your deduction—may decrease.

• Points and Fees: The points and fees paid on a refinance loan can sometimes be tax-deductible. However, the rules are complex and depend on various factors, such as whether the points are for a new loan or a cash-out refinance. Consulting with a tax professional can help you navigate these deductions.

• Cash-Out Refinancing: If you opt for cash-out refinancing, the cash you receive may be considered taxable income. This can have significant tax implications, so it’s crucial to understand how this will affect your overall tax situation.

By considering these tax implications, you can better understand the full financial impact of refinancing and make a more informed decision.

Refinancing and Your Financial Goals

Refinancing can help you meet your financial goals, such as saving money on your monthly payments or paying off your loan faster. Consider your financial goals and whether refinancing aligns with them. Refinancing can also help you consolidate debt or get cash out for home improvements.

Refinancing and Your Credit Score

Your credit score can affect the interest rate you qualify for and the terms of your new loan. A good credit score can help you qualify for better loan terms and lower interest rates. Consider checking your credit score before refinancing and working to improve it if necessary.

Types of Mortgage Refinance Calculators

When considering refinancing, it’s essential to use the right tools to make an informed decision. There are several types of mortgage refinance calculators available, each tailored to different needs:

• Basic Refinance Calculators: These provide a straightforward estimate of potential savings from refinancing your mortgage. By inputting your current loan balance, interest rate, and monthly payment alongside the terms of the new loan, you can quickly see how much you might save.

• Advanced Refinance Calculators: For a more detailed analysis, advanced calculators take into account closing costs, points, and other fees. They allow you to compare different loan scenarios and determine the break-even point for refinancing, helping you understand the long-term benefits.

• Cash-Out Refinance Calculators: If you’re looking to tap into your home equity, these calculators estimate the amount of cash you can borrow and how it will affect your monthly payment. This is particularly useful for planning large expenses or consolidating debt.

• FHA Refinance Calculators: Specifically designed for homeowners with FHA loans, these calculators help estimate potential savings when refinancing to a new FHA loan. They consider factors like mortgage insurance premiums and the new interest rate to provide a clear picture of your savings.

Using the right mortgage refinance calculator can help you make the best decision for your financial situation.

Next Steps

If you're interested in refinancing, you can get started with our online Loan Application.

Refinance Calculator Resources

• Cash Out Refinance