Reasons to Refinance

Many homeowners see ads or hear of lower interest rates than they currently pay on an existing home mortgage loan. There may be good reasons to consider refinancing. Interest rates may have fallen; currently, in the United States, interest rates are lower than in many years. The homeowner’s personal situation may have changed due to higher incomes, better credit ratings, and additional assets such as savings and investments. These factors can produce lower interest rates as the borrower is a better credit risk. The first step is to use a mortgage refinance calculator and determine if there are advantages to mortgage refinance.

The Basics

Refinancing involves paying off an existing mortgage and taking out a new mortgage loan. Just as with the first mortgage, one must select a lender, pass credit reviews, and agree on final terms. The advantages of refinancing can mean lower monthly payments and lower overall mortgage costs. If there are other loans connected to the property, one can consolidate all into one new mortgage loan. The costs of refinancing are important when determining the benefits. The refinance costs calculator can determine the number of months needed to recover the costs. Homeowners with substantial equity can borrow more than they owe and take the cash–out option. Cash-out financing is a way to get money for expenses or other goals; however, one must remember that equity is the ownership and converting it to cash reduces the amount of ownership. The loan to value ratio limits the loan amount available through refinancing, and costs include an application fee, loan origination fee and points.

Comparing Mortgage Options

A well-designed mortgage refinance calculator can help answer the key questions. One must consider the costs of refinancing, and the relative benefits of adjustable rate mortgages, fixed term mortgages, and the overall term of financing. Shorter terms save on interest, and the differences can easily amount to hundreds of thousands. Within each mortgage option, one must make further choices. Standard fixed term mortgages can run for 10 to 30 years, adjustable rate refinance mortgages up to 30 years, and interest only loans have a similar range of loan terms.

Using a Mortgage Refinance Calculator

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A mortgage refinance calculator can prepare homeowners with facts and indicate the best options for managing mortgage debt. The goal is simple; homeowners wish to reduce the costs of the mortgage. While many people seek to reduce the monthly payment, the overall costs can go up substantially despite the fact that the monthly costs may go down. Refinancing costs must be added to determine the true monthly savings. The monthly savings must include taxes. To determine if the net result is favorable, one must be sure that it helps meet the homeowner’s goals. One key benefit from using a mortgage refinance calculator is to determine the break-even point, and confirm that one plans to stay in the property long enough to recover the costs.

Comparison Shopping and Competition

Comparison shopping is vital when searching for the best refinancing options. A convenient, easy to use mortgage refinance calculator will aid this process. One must compare all of the costs involved particularly when offered no-costs loan refinancing in which the loan fees are paid through higher interest rates or financed as part of the loan amount. Homeowners can create competition by negotiating with several lenders, and when firms compete for business, the consumer can save from concessions lenders may make to get the business.