Mortgage Calculators and Refinancing Your Mortgage

Many years ago when interest rates seemed to be declining almost every day, I attempted to determine the exact point I could benefit from refinancing my home mortgage. At first I search the internet for a mortgage calculator that could aid me in my decision, but to my disappointment I discovered that they all lacked the sophistication necessary to be of much use.

In fact they were so seriously lacking in their complexity that they were nearly financially ineffectual. So after frustratingly realizing I was not going to find what I needed, I decided to build my own mortgage calculators and in 2005 I transferred them to a browser format making them available to the general public. You can try my mortgage calculators at Mortgage Calculators.

Determining the economic benefits of refinancing depends on many factors, i.e. 1) what is the rate on your existing loan, 2) what is the current rate at which you can refinance, 3) what will it cost you to refinance, 4) how long do you expect to hold the property hence hold the loan, and 5) what is the time value of money. My website RealEstate-Calc.com can help guide you through a step by step approach in the application of these variables.

When creating any financial calculator or model there is a trade off between complexity and simplicity versus effectual and ineffectual and striking the right balance is the key to being a good analyst. "Mathematical modeling", "manipulation of numeric data" and "displaying numeric results" are all part of an art form! To think otherwise would produce less than superior results.

Most mortgage calculators leave out the ability for the user to adjust for how long they expect to hold the loan and none that I know of allow the user to adjust for the time value of money. Most do not allow the user to adjust for a mortgage that has already been amortizing for a significant period of time.

How do I do it? I combine 20 years of experience as an analyst on Wall Street with the following skill sets: coding in visual basic, yield curve construction, financial statement preparation, business plan development, complex derivative valuation, and risk management. I am a CPA in the state of New York.

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Reasons Behind Refinancing Mortgage

Mortgage refinancing has become a common practice these days. In the old days, when you get a mortgage, you stay with it until it's all paid out. But nowadays due to interest in real estate, investments and credit cards, consumers are becoming more in debt. Refinancing is a popular option for homeowners trying to stay out of the cycle of debt. Here are some reasons why refinancing could be the answer for you.

1. Lower interest rates. Interest rates can make all the difference to your monthly repayments, especially if you have an adjustable rate mortgage. You are probably ok for the first few years when the interest rates are still fixed. But when the rates start adjusting, your repayments could get out of hand. If you refinance at a time when the interest rates are low, you can lock in that low interest rate. This will make your budgeting easier at the same time you will have some extra cash to spend on other things.

2. Cash payout. You might have credit card debts or a Christmas fund that needs some extra cash. This might not be a small about, and usually you can't get your hands on that much cash without having to take out another loan. However when you refinance, you can get a cash payout equal to the amount that you have paid into the mortgage and the current appraised value of the home. You could get that money and even with a lower interest rate.

3. Shorten your loan term. Most common mortgages for from 20-30 years. If you have a fixed rate loan, your repayments will stay the same for the duration of your loan. The longer your loan is, the more interest you will be paying in the long run. If you have extra money, you should pay off your home loan. Refinancing to a lower term mortgage, say from 30 to 15, will also lower the amount you pay for your interest by almost fifty percent. Also if you've already paid off ten years of your mortgage, refinancing will mean that you will pay off your loan five years earlier.

4. Better credit rating. When you first borrowed money for your mortgage, your credit rating may not be so good. Perhaps you were only able to get an adjustable rate mortgage with a slightly higher interest rate. Five years later your credit rating may have improved. Hence you could now qualify for a fixed rate loan. This way your monthly repayments are more stable, even so you should only switch to fixed rate loan when the market rate is low.

There are many advantages to refinancing your mortgage. The important thing is the shop around and wait for the right moment.

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Refinance Calculator At Your Door Step

Refinancing is like shopping, and your mortgage can be classified as a totally major purchase. That's why the phrase "shop wisely" applies. As consumers, we always want to get our hands on the best deals for us, so we research on the specs, look around, and compare. The same goes for mortgages. Nowadays, the choices widely vary and different loan companies offer different kinds of interest rates. Sometimes, it can become quite confusing to determine the best deal to get. That's why resources such as a refinance calculator can come in handy.

Using A Special Calculator

We've already established that securing the best mortgage for you can be a daunting process. With a refinance calculator, the hassles of computing numbers will ease up. You can easily use a refinance calculator to determine what different mortgage rates and corresponding terms will cost you. Some refinance calculators even allow you to compare up to 3 or 4 different mortgage rates.

How it Works

To use the calculator, you usually need to have the following information to input into the entry fields:

- the loan interest rate also called the mortgage rate

- the amount you intend to loan also known as the principal or the mortgage amount

- the period in which you will be repaying your loan also known as the loan term

Other information that you need to know to get an accurate number for monthly payments includes:

- mortgage insurance

- property taxes

- property insurance

If you the above-mentioned are applicable to you and you have updated data, then never take these for granted since they will be a substantial part of your loan repayments.

Once you key-in these necessary details, the calculator will automatically compute the payments you'll need to make every month. Other uses of such calculators include comparison of various loan amounts and outcome of different mortgage rates, as well as shorter or longer payment terms.

Whether you're looking to refinance your mortgage, moving to a new house or buying your first one or you're simply keeping track of your financial status, always keep a loan calculator handy. It will make your task far more convenient for anyone, even a math genius.

What's Next?

After using your refinance calculator and knowing how much you can afford, you now need to find a mortgage company that has the best deal for you. A good deal may differ for each person according to present financial status, source of income, number of dependents, and so many more. So aside from relying on other people's testimonials on mortgage companies, it's also best to consult the advice of a financial expert. And don't just settle on the first good deal you see. Find two other good deals before you close.

Once you've found the best loan company for you, make sure you have the necessary documents ready to jumpstart your loan application. Don't wait until after the last minute to secure these papers since they could also take time to process.

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Should You Refinance Your Mortgage?-Take Help From Mortgage Calculator

Interest rates constantly fluctuate, so when is the time right to refinance your home? One of the tools that can help you decide this is a mortgage calculator.

It shows you what your new payments will be, and whether the difference is worth the leap right now.

The most common reason to do a straight refinance is to take advantage of lower interest rates to lower the payment or reduce the term (the number of years to finish paying off the note.)

To work with a refinance mortgage calculator, you'll need to know details about your current loan like the original loan amount, the original term (number of years to pay off), the number of months you've already paid, your interest rate, and, perhaps, the number of years until you intend to sell.

For the new loan, the mortgage calculator will want to know the loan points and interest rate on the new loan and approximate closing costs. Don't even try to figure it out on your own. Just look up several refinance mortgage calculators on the net and open them in separate windows or tabs in your browser. Start filling the figures into one after another, setting them to calculate as soon as they are loaded. Now, take a break, drink something uncaffeinated and relax a bit. When you're ready, return to the computer for the news.

Have a look at the figures for monthly payment, term, and the breakeven date. See if the mortgage calculators come anywhere near agreeing. Like the scoring in the old Olympics, throw out the high and low numbers and average the rest to get an approximation on your savings.

What you are concerned with is the breakeven date. The breakeven date is determined by the mortgage calculator as the month in which the savings on the mortgage covers the cost of the refinance itself. If the breakeven date is five years down the road and you're selling in four, then it doesn't matter how good the interest rates are.

You'll still lose money. On the other hand, if you're expecting to stick around more than five years, now is the time to go for it. You can redo the figures on the mortgage calculators with different interest rates and different terms (number of years to repay) to see where the breakeven point and the terms line up with what you can afford to give you the best deal.

But what if you have a different reason to refinance, say to "cash out" the equity of your home, for whatever reason. Emergencies happen, debt consolidation need to occur, and a good mortgage calculator can still help you figure out how to get your best deal.

When you feel like you know what you want, print out the best options, collect up your documents and head to the mortgage broker. One note: a refinance is a new note; you will be paying all appraisal fees, points and closing costs associated with a brand new note. The mortgage calculator doesn't take this into account. Proceed carefully and cautiously.

Don't sign until you understand everything!

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