This free online Home Mortgage Refinancing Calculator will calculate the net effect of refinancing your home loan at a lower interest rate.
Plus, unlike most other online mortgage refinancing calculators, the home mortgage refinancing calculator on this page will even calculate how long you will need to stay in your refinanced mortgage in order for the lower interest rate savings to offset the cost of the new home loan.
If you have used mortgage refinance calculators on other web sites, you may have noticed that some only return the difference between your existing house payment and the refinanced house payment. And if the refinanced house payment is lower, you will often see the calculated difference, followed by the statement, "Monthly Payment Savings."
There's only one problem. Unless you know the total cost of refinancing (interest plus closing costs), the term "savings" cannot and should not be used in the results.
If you refinance at a lower rate, but extend the payoff period out longer than the existing loan term, there's a good chance that refinancing will actually end up costing you more money, as opposed to "saving" you money.
So please, just because the refinanced house payment is lower than your current payment, DO NOT ASSUME YOU WILL BE SAVING MONEY BY REFINANCING. And if you happen upon a refinance calculator that does not calculate and compare the long-term costs of refinancing, I suggest you do your calculating elsewhere.
Contrary to what you might hear from lending institutions (who are usually just trying to get you to borrow more money for a longer period of time), the only time you might consider refinancing is if your existing mortgage is fairly recent (most interest is paid in the early portion of the repayment term), and if doing so will save you money in the long run.
In other words, if you have the opportunity to refinance at a rate that will reduce your overall cost of repaying the home loan (including closing costs), I would proceed, but with the utmost caution. Why? Because ...
If you have determined that refinancing your existing mortgage will save you money in the long run, make sure you request a detailed breakdown of all upfront costs, along with an amortization schedule showing principal and interest breakdown and totals. Also be sure to get a copy of the loan agreement along with a magnifying glass to make sure you can scour every word of the fine print.
Be especially watchful for any verbiage related to "prepayment penalties," as some mortgage companies will offer you low, or no-cost refinancing, but often at the expense of higher interest rates and stiff prepayment penalties that will prevent you from getting a cheaper loan at a later date.
With that, let's use the Home Mortgage Refinancing Calculator to calculate and compare the costs of your existing mortgage versus the costs of a mortgage refinanced at a lower rate.
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Original home loan amount: The dollar amount of the original home loan (principal borrowed).
Original annual interest rate: The annual percentage rate (APR) of the original house loan.
Original home loan term in number of years: The original repayment term of the house loan in number of years.
Number of house payments already made: The number of monthly house payments you have already made on your existing home loan. If you have not made any payments at all, leave blank or enter a zero.
Refinance rate: The refinance rate (APR) of the new house loan.
Refinance loan term in number of years: The refinance loan term of the new house loan in number of years.
Points: The points that will be assessed on the new mortgage. Enter as a percentage (for .015, enter 1.5%).
Other closing costs: The total of all other costs that will be assessed for the creation of the new mortgage. This should include costs such as application fees, origination fees, appraisal fees, inspection fees, title fees, survey fees, and prepayment penalties. When these fees are added to points paid, the upfront costs of refinancing can add up to 3% to 6% of the loan amount.
Finance closing costs? If you would like to bundle all of the upfront financing points and fees into the new loan amount, select Yes from the dropdown menu. Otherwise choose No. Choosing Yes will lower any refinance savings you would otherwise realize.
Current monthly principal and interest payment: This is the amount of your current monthly principal and interest (PI) mortgage payment. This does not include property tax or insurance payments.
Current mortgage payoff amount: This is how much you still owe (principal balance) on your home loan after deducting all of the principal payments you have already made.
Closing costs on new mortgage: This is total of your points paid plus all other closing costs as entered in the Refinance Terms section of the home mortgage refinancing calculator.
New mortgage amount: This is loan amount the home mortgage refinancing calculator will use for the new mortgage amount. If you chose to include the closing costs in the loan amount, this result will be the combined total of your existing mortgage balance, plus the calculated closing costs.
Months till refinance savings offsets closing costs: This is how many months you will need to stay in your refinanced mortgage before the refinance savings will offset the cost of obtaining the new mortgage (closing costs).
Monthly payment row: This row shows your current principal and interest payment, the refinanced principal and interest payment, and a column containing the difference between the two monthly payments. A plus sign (+) indicates a payment increase, whereas a minus sign (-) indicates a payment decrease.
Net cost: This row shows the total of the remaining interest costs on your existing mortgage, the interest costs plus closing costs of the refinanced mortgage, and a column containing the difference between the two net-costs. A plus sign (+) indicates a cost increase, whereas a minus sign (-) indicates a cost decrease.