Should I Use a Refinance Calculator?

If you’re thinking of refinancing, but are not sure whether the difference in what you’re paying now and what you could be paying is enough to make you want to switch, a mortgage refinance calculator can help.   These unique online tools crunch the numbers for you for all kinds of different refinancing situations, helping you determine the costs associated with refinancing, and whether or not it would be a smart idea for you.

Benefits of Refinancing

You may already know that refinancing could offer substantial benefits – and not just by putting extra money in your pocket.  If you’re refinancing and you can use the difference as an added payment toward your home loan, or you get a promotion or pay raise, you can pay more toward the principal of your loan, meaning you build equity faster.  But a mortgage refinance calculator can do more than just show you how much you might save every month by comparing home loan interest rates.  You could think of it as the utility knife of home loan financing, helping you go well beyond a basic picture of your financial future.

APR or Fixed Rate?

Many people consider using a mortgage refinancing calculator because they’re tired of dealing with the uncertainty of payments they make with an adjustable rate mortgage or ARM.  Still, other people who have a fixed rate mortgage consider switching to an ARM because they’d like to take advantage of current lower rates and possibly pay less interest overall.  Each type of home loan offers something different for everyone, and the one you choose should be based on your own unique financial situation and how much you can afford to put toward your home.  A mortgage calculator can help you find out which may be the better solution for you.

Pay Off Your Mortgage Faster

Using such a calculator only provides an estimate as to the costs you might incur. It takes many factors – but not all – into consideration when coming up with a final amount.  That’s why, if you’re financially able to make a sizeable pre-payment or additional payments on your home loan throughout the year after you’ve refinanced, you’ll be able to pay off your mortgage (and fully own your home) faster.  Here again, it’s a smart idea to use a mortgage refinance calculator to see how much you may save in interest payments over time.  The differences could surprise you!

Consider a Cash-Out Refinance

In some cases, a cash-out refinance may be the right option for you.  If you’d like to tap into the existing equity of your home and use the money to pay off debts like credit cards, medical expenses or a child’s college education, this type of refinance can help you get the money you need. Still, every homeowner and every financial situation is different.  It’s best that after you use a mortgage calculator, you speak with a home loan consultant to better understand your options.  A home loan consultant has a great deal of experience helping homeowners in a variety of situations find the type of refinancing loan that’s right for their needs.  There’s no one size fits all solution, and speaking to a trusted home loan expert can help you come to an informed decision about your refinancing future.

Take the time to run the mortgage calculator through a few different scenarios – including the best and worst of times, for example, if you or your spouse suddenly lost your income or couldn’t work. These simple steps help paint a bigger picture of the benefits of refinancing beyond saving money and can help you make a smarter decision.

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