How To Use The Refinancing Calculator

Since refinancing your mortgage will cost you time and money, you should do some research first to see if it is worth the effort. Using our refinance calculator will help you make that decision. Follow these few easy steps:

  1. Enter your principal and interest (P&I) mortgage loan P & I is short for principal and interest. It is a monthly expense that you pay which includes the interest you incurred from the taking out the mortgage loan, plus a monthly amount used to paying off the loan amount.
  2. Put in your new loan amount
  3. Enter your new mortgage rate
  4. Finally, enter your new loan term and amortization

Amortization means a gradual reduction of the loan amount over time. The main purpose of amortization is to show a value of resale or redemption.

Refinance Calculator



After those steps are taken, you should now see at the bottom of the home mortgage refinance calculator your new result versus your old payment. It should then also tell you how much you could save per month, per year and per lifetime by refinancing to the new loan.

Refinancing Basics

Refinancing is usually a consideration when one needs more cash flow. The idea is by changing your mortgage through multiple variations, it will free up extra cash to be used for other purposes. Some of the ways you can refinance is through the following:

  1. Qualifying for a lower interest rate or interest cost, which in turn lowers your monthly payment.
  2. Extending the amount of years needed to pay off the mortgage also can lower your monthly payment.
  3. You can use a refinance to change your interest rate (for example: from a 5/1 arm to a 30 year fixed), which lowers your finance risk.
  4. Another use of refinancing is to pay off other debts, loans or other forms of financial consumption.
  5. Finally you can extend your time of mortgage re-payment in order to pay off other assets or debts.

What To Consider When Refinancing

Refinancing will cost you some money you will need to pay upfront at the time of the closing. This is to pay for the processing of the new loan. They are usually called points or premiums. Each point will equal 1 percent of the total loan. So, if the refinance you choose has two points attached to it, then you will have to pay 2 percent of the total borrowed loan at the time of closing. Most lenders will have a multitude combination of interest rates and loans. If you pay higher points or “premiums” you typically will receive a lower interest rate than if you paid less or no points. Also, sometimes lenders will offer discounts that will in-turn generate negative points by financing part of the loan themselves. Just make sure you fully understand the contract and read all of the fine print.

So, depending on your financial situation, it would be better overall to pay more points up front to get a lower interest rate then to pay little to no points. You will have a higher startup cost but you will be rewarded with lower monthly payments. Also, you may want to consider paying for the higher points out of some of the liquid cash you will receive by refinancing your mortgage.

Other Types Of Refinancing Loans

A Cash Out loan is a loan used when you want to do some home improvement or if you need to consolidate credit card or other debt. It will not be a solution for lowering your monthly payment or the amount of time you pay off your loan, but it can help free up some cash. If you have equity in your home, you can refinance with a larger loan than what you currently owe and then pocket the cash difference to spend, as you need.

There is also a No-Closing Cost loan in which you pay no upfront closing costs fees at the time of contract signature. This sounds inviting, but in fact you will end up paying the expense of having the new loan over the life of the new refinance. The yield spread premium (YSP) is something the mortgage company can receive when they lure a customer to a loan with a higher interest rate.

This may be worth it if the current market rate is lower than your current rate by at least 1.5% or more. A no cost loan is suitable for individuals who don't expect to keep their loan for an extended amount of time. It is also used if you plan to sell the property or if you are planning to refinance again because you expect the interest rates to drop.

Just use the easy refinance calculator above to start determining what option is right for you.