Use this calculator to determine the impact of refinancing your mortgage loan. This calculator will estimate estimate your new mortgage payment as well as estimate your total interest savings by refinancing. If the interest savings result is negative, then the results represents your additional interest costs with the new loan.
Mortgage Refinance Information
What is refinancing?
Refinancing is simply paying off an old loan with a new and usually cheaper loan. Home mortgages take decades to pay off, so most homeowners find their life circumstances changing in a way that could land them a better loan today. Maybe you scored a big promotion at work, finally paid off that credit card debt or perhaps the overall market has tanked and interest rates are now ultra-low. Refinancing your current home gives you the chance to take advantage of these new opportunities.
How do I go about refinancing?
The process for refinancing a loan is easier than getting one in the first place. You’ll have to submit all the same supporting documentation, such as tax returns, pay stubs and current debt, as well as go through the normal verification process, but closing costs are usually lower and no new down payment is required.
The first step is to shop around and compare new loan terms with other lenders. Typically you’ll find much lower interest rates, if you’re willing to pay some cash upfront to purchase “discount points.” This means prepaying a year’s worth of interest for each percentage point, in exchange for reducing the long-term interest rate you pay every year by that many percentage points.
Once you’ve chosen a lender to refinance with, little changes except for who you’re making monthly payments to. The new lender will pay off your old loan, assume title to your home as collateral and continue collecting and paying out escrow payments.
The Best Time To Refinance Your Mortgage
- Falling interest rates: rates fluctuate constantly, so if you see a big difference in the current rate then you could save thousands of dollars in interest payments. Generally, you’ll want to find an interest rate at least 2% points lower than your current rate to justify the upfront costs of refinancing.
- Not planning on moving anytime soon: It will take a few years before the accumulated savings from a new loan are higher than the discount points and closing costs you paid, so make sure you don’t plan on selling the house and paying off the loan for quite a while.
- Struggling with monthly payments: Maybe interest rates aren’t any better nowadays, but if you’re having trouble making your current payments then extending the loan could significantly lower your monthly costs.
- Need a new type of home loan: Tired of those rising interest rates from your adjustable rate mortgage? Maybe stuck paying PMI in a FHA loan even after the loan to home value is under 80%? Then refinancing allows you to choose any new loan type you’d like.
- Consolidate your debt: If you’ve taken out a home equity line of credit (HELOC) loan, the interest rate is likely higher than your mortgage rate. Refinancing lets you combine both loans into a new mortgage with a single and hopefully lower interest rate.
- Build Equity Quickly and Pay Off Your Mortgage Sooner: If your living situation has improved and you can afford to make higher monthly payments, then refinancing into a shorter loan is an enticing option. This lets you build equity faster or saves you extra interest payments if you plan on paying it off early.