This mortgage refinance calculator can assist you to get an idea whether refinancing your loan at a lower interest rate, with or without cash out is beneficial for you. Below the form, there is in depth information on how to analyze refinancing plans and consider their advantages and disadvantages in order to make the best decision for you.
How does this mortgage refinance calculator work?
This personal finance tool might come in handy for anyone looking for simulating whether a refinancing plan at a lower interest rate would have a positive impact on the monthly payment level and on the overall interest paid. As such this form considers the details for both the existing and of a new loan terms and conditions, that should be provided, as explained below:
Current loan details:
- Initial loan amount borrowed meaning the original value in the agreement.
- Loan term as negotiated with the lender at the beginning.
- Annual interest rate paid currently.
- Time left to pay from the initial term.
New loan assumptions:
- New term as desired within scenario.
- New annual interest percentage.
- Points/ upfront payment percentage.
- Refinance costs where applicable.
- Desired cash out meaning the amount of money you want to borrow with this occasion for other plans you may have.
The analysis displayed by this mortgage refinance calculator consists in the following details:
- The comparison between the two monthly payment levels and the monthly and overall savings/losses in interest you can get by refinancing.
- The principal left to be paid and the number of monthly payments to be made in both scenarios.
- Total paid and the value paid on interest in both current and existing loan assumptions.
- The total you bring home in case the desired cash out amount is specified.
Example of a result
Let’s assume that someone borrowed an initial amount of $200,000, at a fixed interest of 4% over 30 years and paid 5 years until now. What happens by refinancing the remaining part of a loan with an offer that ensures as 3.8% interest rate for 25 years, refinance costs of $1,000, while a cash amount of $2,000 is desired and there is no upfront payment required?
■ If you refinance you would pay monthly $945.30 instead of $954.83 as you are currently paying on your loan.
■ Refinancing could save you monthly $9.53 from interest. Overall, this means you can save approx. $2,857.69.
Item of comparison |
Remaining of current loan |
New loan |
A) Monthly payment |
954.83 |
945.30 |
B) Principal left to be paid/new loan amount |
180,895.03 |
182,895.03 |
C) No. of monthly payments to be made |
300.00 |
300.00 |
D) Annual interest rate |
4.00 |
3.80 |
E) Total interest paid |
105,554.15 |
100,696.46 |
F) Total (principal + interest) paid |
286,449.18 |
283,591.48 |
G) Upfront payment value (points) |
0.00 |
0.00 |
H) Refinance costs |
0.00 |
1,000.00 |
I) Total refinance effort |
0.00 |
1,000.00 |
J) Desired cash out |
0.00 |
2,000.00 |
K) Total you bring home |
0.00 |
1,000.00 |
What to consider before refinancing your mortgage …
In order to establish whether this will generate savings on your side you have to take into consideration many factors, amongst them are:
- Usually a mortgage refinance is beneficial when the new loan ensures a lower interest rate level, or at least comes with the perspective that in short time frame it will start decreasing or that it will continue decreasing by changing the lender.
- Usually refinance plans come up with onetime costs to take a new loan or even closing costs on the existing loan you may have to pay, which means this should be considered too when deciding on the solution for you.
- Financial advisors recommend to refinance a mortgage in case the term left to pay is enough large as so a lower interest rate may then result in significant savings in interest.
- Some use this financial tool to get extra cash out for other plans or needs, which makes even important to get the loan at lower interest rates otherwise the monthly payment effort will be the same or even higher than the current one.
- When refinancing you should also revise the term you consider you can afford to payout the new loan. If this analysis is properly made then you may get surprised that either you can set up a shorter term as you can afford to pay in the same level as on current loan, or that in case of some cash out you need to set up a longer term that actually is left to be paid on the initial mortgage.
- Compare at least 3 refinance plans and take into account the right figures on your current loan. That means you will most probably need to contact you current lender and ask what is the exact amount of money left to be paid.
- Most of lenders requires some upfront payment in case of this financial product which means when analyze it you should take that into account too. Our mortgage refinance calculator allows you specify that percentage as well in the form, so that you can get a closer image of the figures.
- Before taking the decision contact your current lender and ask whether they have any plans to reduce their interest rates within the couple few weeks or so, as you may then get surprised that their quotes decreased and reached a level lower than you negotiated with the next lender.
3 Advantages
- Usually refinance plans come up with lower mortgage quotes.
- The customer can negotiate a new term to payout.
- The client can ask for cash out to finance other plans or needs not related with the current mortgage.
3 Disadvantages
- Most of refinance plans involve some onetime costs and fees either related with the current loan (closing costs) or with the new one, or even with both.
- Reconsidering the loan term in case of refinancing could lead to an overall cost on interest higher than in case of current debt.
- When refinancing, the lender will most probably appraise you property’s value according to what is on the market today, and if its price decreased, that means its value could be set up at a lower level than in case of your current mortgage.