The purpose of this calculator is to show how refinancing can save you money: not only you can appear your current mortgage conditions with the new one, but you are offered with two refinancing scenarios, so that it will be easier to choose between lenders, if in doubt with what would be the best deal. You just have to input all the specified parameters then hit “calculate” to generate a detailed report. Here you will see if there will be an actual saving, how much will be your new monthly payments and savings at the end of mortgage; also important, you will know when it is the “break even point”, that is the time necessary for the refinancing costs to be fully amortized, and where you begin to earn the benefits. If you chose two refi options, you will get two outcomes.
This tool works also well if you want to refinance other loan types: the essential parameters are the same; defaulted values refer to a sample mortgage loan, so you will likely have to adjust all of them manually.
– Principal:the amount of mortgage free of interests and any other intrinsic costs. When you read the amount of principal in the results table, it refers to how much is still owed from the initial size of your loan. The new loan balance will be higher if you make a cash-out refinance.
– Interest rate: the percentage applied by lenders to the mortgage amount. How much of interests you are going to pay is determined by the principal sum. For instance, if your mortgage had a principal amount of $200,000 with annual interest rate of 5%, you would pay $10,000 in interest for every year of the loan term. Choosing a lower rate in your new mortgage is crucial for saving thousands dollars. Your initial monthly payments will be first addressed to cover the interests, and the remainder go to principal. We apply a default value according to the most recent rates.
– Loan term: the deadline by which to pay off your loan, more commonly 30 or 15 years. For your new loan, it can stay the same, be augmented or reduced, depending on your needs. Shortening the term will make your monthly payments rise, but reducing the owed amount for interests.
– Refinancing costs: the initial expenses that a lender charges for closing a practice of refinancing. You can pay them upfront or have the option to roll the fees into the new loan, but this will put them under interests costing you more.
– Break-even point(s): how long it will take to amortize the refinancing costs.