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A Refinance Calculator is your Secret Weapon

refinance calculator
When a mortgage loan Rep tells you it's time to refinance reach for your secret weapon, a refinance calculator!

When Should You Refinance?
Maybe you remember the old rule of thumb that your interest rate should be 2% lower than the rate you have.

Well I think we all realized that this is no longer true.

See, before people began refinancing on a yearly basis they really did not understand the process as well as the costs. Keeping a mortgage was looked at as a long term thing; also, the costs were higher years ago.

Now it is so competitive that the costs are pretty streamlined or "bare bones". People are no longer accepting processing fees and originating fees which were all pretty common 10 -15 years ago.

It is all about return on your money
If you can refinance and lower your payment that is a great thing; however, you do have to realize that you are paying up front money usually added to your loan to save money monthly or in your monthly payment!

Plus you are possibly adding years back on to your mortgage which means you will be paying a smaller payment back but for more years.

It is not incredibly difficult to figure out if it is worth it, but you do have to do some figuring to get an idea. You have to figure out your "break even" point and then go from there.

A refinance calculator will tell you exactly that!

Let us consider a simple example: I have approximately 28 more years to go on my mortgage, my rate is 7%, the loan balance is $100,000 and my payment is $678.61. These are the key things you must start off knowing.

If I refinance I will pay fees of $1,450.00 get a rate of 5.75% and go back to 30 years and my payment will be $586.49.That is a savings of $92.12 per month which is pretty good and after 16 months I will have recouped my $1,450.00 that I spent.

As long as I stay in my house at least 16 months I will not really lose.

How much will I save over the life of the loan?

For this you have figure out the savings over 360 payments but factor back in the two more years you had to pay. Over 360 payments you will have saved $33,163.00; however you must subtract the two extra years you will be paying which comes to $14,075. This subtracted from the $33,163.00 leaves $19,088.00 which is the true savings.

Many lenders sell you on the low payment, while nearly disregarding the rest of the equation. Make sure you know the full financial picture before you refinance.

Hence, your secret weapon is a refinance calculator!

For help on figuring out if it is worth it for you to refinance or not, use a good online mortgage refinancing calculator.  

Mortgage Refinance Calculator.

Related Refinancing Links