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When you refinance a mortgage, you may have access to several different benefits, such as lower monthly payments or a shorter mortgage term.

Using a mortgage refinance calculator can help you understand how much lower your monthly payment may be. It's also a good way to tell how much more your monthly payment may be if you're looking for a shorter loan term.

No matter your reason for wanting to refinance your loan, take a look at these frequently asked questions to stay informed on everything you need to know about a home loan refinance.

FREQUENTLY ASKED QUESTIONS


Why use a mortgage refinance calculator?

Using a mortgage calculator is a quick and easy way to get a "ballpark" idea of what you could be facing when you refinance your mortgage.

To get started, you'll have to add some details about your home loan, like the interest rate you have, what your term is, and the type of refinancing you want to do.

This can help you better understand how a refinance works and whether or not it's right for you.

Refinancing a mortgage could be great for those who are in a good position to do so and have the financial capabilities, but make sure you are well informed.

By taking advantage of our mortgage refinance calculator today, you'll get better feeling of if refinancing is a good option for you.

How does a mortgage refinance work?

The great benefit to refinancing a mortgage is that, typically, you're saving yourself either time or money - or even both!

When you are refinancing a mortgage or any loan for that matter, you're essentially re-applying for a loan and using it to pay off the original loan.

Reasons To Refinance

Many customers do this once they have made consecutive on-time payments with the original loan provider, have had a boost in their credit score, or are looking for a shorter term on their loan. A mortgage refinance does just that.

You may want to also change the type of loan you have received. For example, if you've had a loan with an adjustable rate and you decide to stay in your home, you may want to get a fixed loan to lock in a good mortgage rate.

How much does it cost to refinance a mortgage in 2019?

In most cases, a mortgage refinance can cost between $1,000 and $8,000. This amount of money could go toward a number of fees.

When you apply for a mortgage refinance - just like applying for your original mortgage - there are fees associated with the loan. These can include:

  • application fees
  • loan origination
  • home appraisal
  • document fees
  • property taxes
  • mortgage points
  • title search fee, and more.

Do you get money back when you refinance your home?

There are some types of mortgage refinance loans that allow you to take money out of the equity you have already earned. This is called a Cash-Out Refinance loan.

When you refinance your home, instead of opting for a shorter term or smaller payments, you want to get that cash that you have already paid. This option is typically used by those looking to remodel their home.

Can I refinance without closing costs?

While there is an option to avoid paying closing costs when you refinance, keep in mind that nothing is ever truly free.

You can opt for a no-closing-cost refinance, but you'll either be charged with a higher interest rate or have the closing cost fees added into the total principal you own, which will result in a higher payment.

Either way, the closing cost fees have to be paid.

How can I save money from refinancing?

There are two ways you can save with refinancing. Let's illustrate both.

1. Get a Better Rate

If you're looking to save money when refinancing, opt for a refinance option that gives you a lower monthly payment. In this case, you'll have paid your previous mortgage at a higher interest rate - and have dealt with a larger monthly payment.

Another option is to choose a longer loan term so you can get a smaller monthly payment. Just keep in mind it costs more to finance a loan over a longer period of time.

2. Switch to a Shorter Term

If you don't mind a larger monthly payment and want to save money on the total mortgage, consider a shorter term mortgage. This may result in a higher monthly rate, but you will finish paying off your house sooner and pay less interest.

When should I refinance my home?

There isn't specifically a time frame suggested to when you should refinance your home. There are several factors to consider.

Let's say you're looking for lower payments or a lower interest rate. A rule of thumb is to consider refinancing your mortgage is if you can lower your interest rate by at least half a point.

This could negate the closing costs over a few years. If you intend to move before that point, refinancing might not be the right move.

Example

You originally paid $2,000 a month on your previous mortgage plus $2,000 for a refinance and ended up saving $150 a month on your new mortgage.

You will "break-even" after making fourteen payments. ($150 x 14 months = $2,100)

Other Considerations

Other factors to take into consideration are the fees that will be issued when you refinance your mortgage. You may be charged a prepayment penalty if you end up paying off your original mortgage due to a refinance.

And when in doubt, speak to a trusted mortgage broker about your situation.

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