Home Refinancing: Finding Solutions with Mortgage Calculators

Refinancing your mortgage loan can help you save money in several ways, but comparing multiple refinance scenarios can help you find the best home refinance. Use a refinance calculator for comparing your existing mortgage to proposed home refinancing terms. With refinance mortgages at comparatively low rates, you may be able to lower your interest rate and reduce mortgage payments.

Here are some other suggestions for realizing possible savings through refinancing. Individual situations vary, so it's important to know that actual savings will likely differ from the estimates provided by mortgage calculators.

Refinancing for Savings: Reducing Mortgage Rates and Loan Term

Most people refinance to lower their existing mortgage rate, but you can save even more by refinancing from a 30 year mortgage to a 15 year home loan. Use an amortization calculator to compare your current mortgage to a 15 year mortgage. A typical 15-year mortgage carries an interest rate about half a percent lower than a comparable 30-year loan. The trade off is higher monthly payments, but you retire your home loan much faster and can pay less interest over the life of your mortgage.

Your Home Refinance: Remember to Consider Closing Costs

Refinancing your mortgage involves getting a new loan to replace your existing one; it means paying closing costs. It's important to consider how long it will take to break even on closing costs before you realize savings through refinancing. If you're planning to move within a couple of years, refinancing may not save enough to make it worthwhile. Here is a rough calculation of how long it takes to break even on home refinancing:

  • Use the refinance calculator to estimate how much you can save on monthly payments.
  • Use the closing costs calculator to estimate closing costs for your refinance mortgage.
  • Divide estimated closing costs by the amount of monthly payment savings. The result is the estimated number of months it will take to break even on closing costs--keeping in mind that a lower payment could still result in greater interest expense over the life of the loan.

You may be able to shorten the break even period by accepting a slightly higher mortgage rate and having the lender absorb some or all of your closing costs. Researching refinance mortgage rates and using mortgage calculators to explore additional potential for savings can help you maximize the benefits of refinancing.


Posted By :
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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