Refinance Calculator

Refinancing can be a strategic financial move to meet various goals, such as:

• Lower monthly payments: Changes in market conditions like interest rates or your credit score can lead to reduced monthly payments.

• Save money on interest: Securing a lower interest rate through refinancing can significantly decrease the overall cost of your mortgage.

• Move out of ARM: Transitioning from an Adjustable-Rate Mortgage to a Fixed Rate Mortgage eliminates the uncertainty of fluctuating payments.

• Pay off mortgage faster: Refinancing to a shorter loan term means paying less in interest over the life of the loan.

• Eliminate PMI: If your down payment was less than 20%, refinancing might remove the requirement for Private Mortgage Insurance, saving you money.

There are scenarios where refinancing might not be the best financial decision. A closer examination is required to determine specifics, but generally, consider refraining from refinancing if:

• Recent home purchase: Newly acquired homes might not benefit immediately from refinancing due to the repeat of closing costs and the effort involved. A detailed review is advisable.

• High refinancing costs: The expenses associated with refinancing, typically 3–6% of the loan's new amount, might outweigh the benefits.

• Short-term ownership plans: If you intend to sell your home soon, the savings from refinancing may not cover the initial closing costs.

Each situation is unique. We recommend seeking a financial advisor's insight for a comprehensive analysis or contacting us for further assistance.

Refinancing can offer financial benefits if the savings exceed the associated costs. Explore several ways you might reduce expenses compared to your existing mortgage:

• Securing a rate at least 0.75–1% lower than your current interest could result in savings. Remember, other personal and financial factors also play a role.

• Opting for a shorter loan term, such as switching from a 30-year to a 15-year mortgage, reduces total interest paid. This choice may increase your monthly payments.

• Eliminating Private Mortgage Insurance (PMI) can also lead to savings, especially if your property's value has appreciated, lowering the loan-to-value ratio below 80%.

Use our calculator to determine if the potential savings justify the costs of refinancing.

Refinancing your mortgage comes with its costs, so it's crucial to assess whether the financial benefits outweigh these expenses. This evaluation ensures a worthwhile return on your investment (ROI) in the refinancing process.

The ROI from refinancing is determined by comparing the cost savings achieved through lower interest rates or reduced loan terms against the expenses incurred during refinancing. A positive ROI means your refinancing decision was financially beneficial.

Imagine the peace and pride of owning your home outright. Shortening your mortgage term through refinancing could bring you closer to this dream.

By converting a 30-year mortgage into a 15-year term, you'll pay off your loan faster and save on interest. This move requires higher monthly payments, so it's crucial to weigh this decision against your current financial situation and long-term goals.

You can also accelerate your path to being mortgage-free by making extra principal payments. Whether it's from a work bonus or by adding a bit extra to regular payments, each additional amount goes directly toward reducing your loan balance.

While refinancing offers a structured way to adjust your loan terms, remember, it's one of several strategies to pay off your mortgage sooner. Evaluate all your options to find the best fit for your financial plan.

Refinancing to a longer term, such as switching from a 15-year to a 30-year mortgage, can lower your monthly payments by spreading the loan's balance over more years. However, this means you'll end up paying more in total interest over the life of the loan.

Securing a lower interest rate through refinancing can also reduce your monthly payments. Our calculator tool can help you explore how different rates affect your payments, enabling you to make an informed decision on whether refinancing is right for you.

Before deciding to refinance, assess if the refinancing costs will be recouped before you plan to sell. Typically, closing costs range from 3% to 6% of your loan's total amount.

Calculating the breakeven point is crucial—it's when the cost of refinancing is offset by your savings. Refinancing might not be advantageous if you intend to sell the property before reaching this point, as the initial costs could outweigh the benefits.

Determine the breakeven point by dividing the total closing costs by your monthly savings. This calculation reveals how long it will take for the refinancing to become financially beneficial.

Breakeven point (in months) = Closing costs / Monthly savings

Private Mortgage Insurance (PMI) benefits lenders, not homeowners. Eliminating PMI can free up funds to accelerate your mortgage payoff.

Eliminating your PMI is possible if:

• The value of your home has increased, bringing your mortgage balance to 80% or less of the home’s current value.

• You reduce your loan's principal, so the new balance is below 80% of the home's value.

Your credit score plays a crucial role in refinancing options. A significant improvement in your credit score can lead to better interest rates, ultimately saving you money over the lifespan of your mortgage. Lenders view a higher credit score as an indicator of a lower-risk borrower, potentially resulting in more favorable terms for your loan.

The age of your loan is a significant factor in the decision to refinance. If you're more than halfway through the term of your mortgage, refinancing might not be the most beneficial move. Initially, your payments are predominantly towards interest; refinancing later in the term resets this process, potentially outweighing the benefits of a lower rate.

It's recommended to carefully evaluate your situation with precise calculations to determine whether refinancing under current conditions would be advantageous, considering possible lower interest rates and other factors.

We recommend checking the calculations to see if other conditions like lower interest rate still create some benefits for your situation.

Not Considering Total Costs: Focusing solely on lower monthly payments can be misleading if the overall refinancing costs are not taken into account.

Ignoring the Break-Even Point: Failing to calculate when you'll start saving money after covering the refinancing costs can result in poor financial decisions.

Refinancing Too Frequently: Frequent refinancing can lead to excessive fees, which might negate any potential savings.

Overestimating Home Value: Assuming your home is worth more than it is can lead to disappointment when the appraisal comes in lower, affecting your loan terms.

Choosing the Wrong Loan Term: Extending your loan term to lower payments might lead to paying more in interest over time.

Amortization: The process of gradually paying off a loan through regular payments of principal and interest.

Loan-to-Value (LTV) Ratio: The ratio of the loan amount to the appraised value of the property.

Principal: The amount of money borrowed that remains unpaid, excluding interest.

Escrow: An account used to hold funds for property taxes and insurance premiums.

Fixed-Rate Mortgage: A mortgage with an interest rate that remains constant throughout the term of the loan.

Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that may change periodically based on market conditions.

Private Mortgage Insurance (PMI): Insurance required if your down payment is less than 20% of the home's value, protecting the lender if you default.

Origination Fee: A fee charged by the lender for processing a new loan application.

Appraisal: A professional evaluation of a property's value, typically required when refinancing.

Break-Even Point: The time it takes for the savings from refinancing to cover the costs associated with it.