This **refinance calculator** helps you decide whether to refinance your loan or mortgage and discover what will your monthly payment value be and total paid. Right after the form, there is more information on refinancing so that to make the right move.

## How does this refinance calculator work?

This is a helpful personal finance solution that might come in handy in case you are looking to refinance your loan at a lower annual interest percentage than you currently have. It may be used to figure out if this kind of move would result in some savings on your side, while you only have to provide the following details:

Current loan terms:

- Initial amount borrowed which is the exact amount of money taken when you signed the contract.
- Loan term as agreed with your lender either in years or months.
- Annual interest rate you pay on your loan.
- Time left to pay either in years or months meaning how much time there is until you may be debt free.

New loan details:

- New desired term according to your scenario.
- New annual interest rate.
- Points/ upfront payment percent.

Refinance costs (if applicable)

- New loan application cost where applicable.
- Credit check cost where applicable.
- Appraisal fee where the case.
- Other costs associated with this move.

Cash out (if the case)

- Desired cash out which represents the cash value you want to take by the new loan in order to finance other needs or plans.

The comparison between the two scenarios returned by this *refinance calculator* consists in this information:

- The figures of the two monthly payment levels together with the monthly and total savings or losses in interest you will obtain by taking a refinance loan.
- The amount of money representing the principal you have to pay together with the number of monthly payments to be made in both cases.
- Total amount of money you will pay and the value you will pay on interest in both cases.
- The cash value you may bring home where the case.

Apart from a quick and friendly user interface, it proves to be a very flexible calculation form as it allows choosing any terms either in months or years depending on the case. For instance in mortgages usually terms are longer than in case of personal or auto loans, while depending on the progress of the payment the user may really need to input the term left in months in case he is in the middle of a full year.

## Example of a calculation

Let’s take the example of an individual that has an initial loan of $300,000, taken at a fixed annual interest percentage of 3.5% over 25 years; while he has already paid 10 years until now. What will the results be in case of a refinance plan (no upfront payment requested) to pay the remaining part of this loan, while considering that the new interest will be 3.3% for the next 15 years, with new loan application costs of $500 and a desired cash out of $1,500?

Result:

■ If you refinance you would pay monthly $1,491.90 instead of $1,501.87 as you are currently paying on your loan.

■ In case of a refinance the total interest you would be paying is $56,955.35, while in case of the current loan, total interest paid will be $60,250.37.

■ By refinancing your total paid (principal + interest + costs if applicable) would be $268,541.71, while in case of the current loan the total paid is $270,336.73.

■ See the table below for a more detailed presentation:

Item of comparison |
Current loan |
New loan |

A) Monthly payment | 1,501.87 | 1,491.90 |

B) Principal left to be paid/new loan amount | 210,086.36 | 211,586.36 |

C) No. of monthly payments left | 180.00 | 180.00 |

D) Total principal + interest already paid | 180,224.49 | 0.00 |

E) Annual interest rate | 3.50 | 3.30 |

F) Total interest left to be paid | 60,250.37 | 56,955.35 |

G) Total left to be paid | 270,336.73 | 268,541.71 |

H) Upfront payment value (points) | 0.00 | 0.00 |

I) Refinance costs | 0.00 | 500.00 |

J) Total refinance effort | 0.00 | 500.00 |

K) Desired cash out | 0.00 | 1,500.00 |

L) Total you bring home | 0.00 | 1,000.00 |

M) Total paid for the loan | 450,561.21 | 268,541.71 |

N) Total paid per scenario | 270,336.73 | 268,541.71 |

## Pros and cons of refinancing

Usually refinancing is taken to make some savings that result in an overall interest paid lower than in case of the existing loans. Here’s a short list of pros and cons of this financial product:

Upsides

- Usually results in savings from interest being paid as a lower interest rate is offered.
- The borrower can agree with the lender a repayment term shorter or longer according to his needs.
- The borrower can obtain some cash out by this agreement, which can be used for various plans not related with the existing loan.
- By considering refinancing you can put some pressure on your current lender that may then decide to decrease interest quotes if you start negotiating.

Downsides

- Refinancing comes up with costs and fees such as: new loan application cost, appraisal fee, credit check cost and last but not least closing costs of the existing loan.
- Refinancing at a lower rate usually is linked with a good credit score otherwise it may prove inefficient.

## What you can refinance…

Basically every loan, no matter of its type can be refinanced it that proves a good financial strategy:

- Refinance mortgage loan which is the most used strategy to get a lower interest rate which over a medium to long term may result in significant savings.
- Refinancing personal loan to get by case either a fixed or variable lower interest rate or to get some extra cash if needed, or to get a new term to payout.
- Refinance auto loan to get better rates or new term to payout.

## When to ...

Personal financial advisors recommend using this type of product in case:

- It allows you to gain some savings from the interest being paid which means you should do it if the interest rate is lower than the one on your current loan.
- It allows you to avoid a default by changing its payout term.
- The term left to pay is still larger which means even though in case of a insignificant difference in the relative value of the interest, it may lead you to attractive savings.
- Its associated costs are not discouraging.
- Your credit score is good which is a signal that you can take a new loan at a lower rate.

## Two types of refinancing

There are two types of products:

- Cash-out refinancing that allows you to cash out specific amount of money not related to the current loan, while usually it is secured with the same property (in case of mortgage refinance of course). As it allows bringing some money home, this product usually comes with a higher annual interest percentage than in case of a standard refinance plan. This is due to the fact that the lender has to ensure its risk is covered.
- Standard refinancing that means you borrow the exact amount of money you need to payout the existing loan balance.

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