4 Questions the Refinancing Calculator Answers

With today's refinance rates at historic lows, it's worth taking a look at whether refinancing your mortgage makes financial sense.

You probably need to own your home for at least a few more years for the savings from refinancing to exceed the costs of a new mortgage, and you need to have a good chunk of equity to qualify -- a challenge for many homeowners in the wake of the market downturn.

The refinancing calculator lets you compare your existing mortgage to terms of a new mortgage. Consider the following:

1. How much will I save over the life of the loan?

Enter the original loan amount and term, interest rate, remaining principal and remaining term length of your existing mortgage, and then enter interest rate, term length, closing costs and whether you want to pay the closing costs upfront or fold them into the loan.

The calculator tells you much you save over the life the loan - total interest savings minus closing costs.

For greater detail, use the amortization calculator to get a full amortization schedule that breaks down principal and interest over the life the loan.

2. How will refinancing my mortgage impact my monthly budget?

Interest savings over the life of the loan is important to consider, but the more immediate figure is how much refinancing will lower your monthly payment. After you run the calculation, divide closing costs of a new loan by the difference between your current and projected monthly payment to see how many months it will take for mortgage refinancing to pay for itself.

3. How will taking cash out affect my mortgage payments?

You can refinance for more than you owe to get cash if you have plenty of equity. To see how that move would impact interest and monthly payments, enter the amount of cash you want in the calculator's "cash out" box. Compare that to results when you take zero cash.

4. How does paying for closing costs upfront impact my monthly payments?

You can fold closing costs into the new mortgage -- which means you'll pay interest on the amount -- or pay for them upfront. Run two calculations to see how much money you save by paying for them upfront.

Even with today's incredibly low mortgage rates, the decision to refinance isn't a no-brainer. Mortgage calculators provide the data you need to help make the choice.

Kay Maxwell is a freelance writer who specializes in mortgage and finance topics.

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