Mortgage Refinancing | The Home Loan Expert
You’ve been in your home a while now and are considering how a home loan refinance could be used to better position yourself financially. Using a refinance calculator is a great place to start when estimating how refinancing could potentially lower your monthly payments. The Home Loan Expert is here to break down how a refinance calculator shows you how you can calculate your refinance savings according to your breakeven point.
Should I Refinance?
There are myriad reasons why homeowners choose to refinance their homes. Whether or not a refinance makes sense for your financial goals depends on your intent (what you will use your refinance for?) and timing (how long will it take to reach a break-even point?). The following are some reasons to consider:
- Better Rates and Terms. One reason to refinance your mortgage is to get a loan with more favorable rates and terms. For example, you become a less risky borrower to your lender with the improvement of your financial statements. Having increased financial credibility allows lenders to issue a mortgage with lower interest rates and better loan terms. You may also want to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage to secure a fixed competitive interest rate.
- Accelerated Payoff. Terms on mortgages are usually issued in 15 and 30-year increments. You may want to accelerate your loan amortization schedule with more aggressive monthly payments to save on interest otherwise paid over the life of your loan.
- No More PMI. If you were unable to put down 20% for your down payment at the closing on your first mortgage, chances are you have had to invest in private mortgage insurance (PMI). Once you’ve reached that 20% marker, you are then able to refinance your loan to say goodbye to PMI. You can also determine if you qualify for better rates and terms on your new loan while eliminating PMI.
- Consolidate Debt. Taking out a second mortgage, or equity loan can also come in handy for several reasons. For instance, you can choose to consolidate consumer and installment debts under one secure loan. For many homeowners, this also means being able to take advantage of the better rates and terms offered under their mortgage loan.
- Take Out an Equity-Based Loan. You can also tap into your home’s built-in equity with a cash-out refinance, a home equity loan, or a home equity line of credit (HELOC). Each of these loan types is similar in purpose: taking out a considerable chunk of cash to pay for a big-ticket expense (college tuition, student loans, weddings, home renovations, etc), but differ in rates and terms. You can find out more about which of these equity-based options are suitable for you.
How Can I Use a Refinance Calculator to Estimate My Savings?
A refinance calculator will compare the monthly payments on your current loan to the new monthly payment you’d expect with your new loan. Fill in the entry fields to the inputs below to see how much you could save with a mortgage refinance.
- Current Monthly Payment. Enter your current monthly payments, based on the principal, interest, and other recurring monthly housing expenses.
- Current Loan Interest Rate. Include your current interest rate.
- Balance Left on Mortgage. Input the outstanding amount still owed on your mortgage balance.
- New Interest Rate. Enter an estimate of your new interest rate.
- Remaining Loan Term. Fill in the number of years left on your current loan.
- New Loan Term. Enter the number of years on your new loan.
- Closing Costs and Upfront Fees. Refinancing on your mortgage is essentially applying for a new loan. That means costs and fees are included like appraisal and inspection fees, title and legal fees, document preparation fees, discount points, a credit report, escrow costs, and other expenses that will either need to be paid upfront or rolled into your new loan.
Then hit the calculate button to see how much you can save each month with your mortgage refinance. It should show you a comparison of your current loan’s monthly payments next to the monthly payments under your mortgage refinance. You should also be able to see a chart of your break-even period in relation to your monthly savings to see how long it would take your loan refinance to be worth it.
What About the Break-Even Point?
The break-even point is crucial to determining if a mortgage refinance is right for you. This means not only taking into account your principal and interest but the other bundled fees that are included in your monthly payments. The longer you plan to stay in your home, the greater your cash savings is likely to be. This is because the break-even point is reached when all of your refinancing closing costs are compensated for by the savings from your new mortgage payment compared to your previous one.
Refinancing makes more sense if you plan to stay in your home longer than the break-even point, otherwise, you could potentially lose money, even with a lower interest rate. It is recommended that you plan to stay in your home for another two to five years if you plan to refinance your mortgage.
How Can The Home Loan Expert Help?
More than a decade ago, The Home Loan Expert got its start by knocking door-to-door in neighborhood communities, asking homeowners if they were aware of how they could position themselves better financially with a mortgage refinance.
We have grown since then, providing nationwide services with a local vision. Our team of friendly lending Experts is drawn from the same communities we serve, making us relatable and knowledgeable about what’s really going on in your neighborhood. Our in-house underwriting process means you are able to save both time and money when applying for your loan refinance approval — with closing times in as little as two weeks.
Using a mortgage refinance calculator is a great place to start when getting an estimate on how much you can save with a home loan refinance. Speaking with a knowledgeable lending Expert can provide you with more concrete figures and what to expect when going through the loan refinance process.
Give us a call at 800-991-6494 to find out more about how you can potentially save with a mortgage loan refinance and to guide you through the process of which factors will determine the rates and terms you could qualify for on your mortgage refinance.
