Using a mortgage refinance calculator

Save with a mortgage refinance calculator

If you're looking to lower your monthly mortgage payments, you can get a good idea of what your new costs would be by using the refinance calculator.

A refinance calculator will help you determine how much money you can save by refinancing your home loan to take advantage of today's low interest rates.

The calculator compares information such as your current interest rate, monthly payment, balance left on your current mortgage and length of years left on the loan, with what your new interest rate and length of loan would be.

Counting cost

You also need to keep in mind that there are costs associated with refinancing your home.

The calculator will ask if you need to pay points as well as look at other fees, such as the application fee, appraisal fee, and costs of the title search and title insurance.

Once you enter that information, the calculator will give you your new monthly payment, the amount you'll save each month, the difference in the amount of interest you'll pay and the number of months it will take for you to recoup your costs.

Some homeowners are now opting for cash-in refinancing, where they choose a new mortgage that is smaller than the amount of the existing loan and they bring a check to the closing table.

While that may sound counterproductive, it's a way to take advantage of the still-low refinancing rates without having to pay mortgage insurance or to avoid jumbo loan limits.

Best strategy

Private mortgage insurance, or PMI, is typically required with loans that are for more than 80 percent of a home's assessed value. The housing market decline has put the squeeze on home values in many markets, so bringing cash to the closing is a way to avoid private mortgage insurance.

Otherwise, it may not be worthwhile to refinance, regardless of how low today's refinance rates are.

Using the refinance calculator is a good way to get an idea of what your best strategy may be.



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