Mortgage Loan Payment Reduction and Refinance Calculator

How Does Refinancing Work?

Acquire a New Loan:

•  When you refinance, you take out a new mortgage loan to pay off the original one.

Terms of the New Loan:

• Your new monthly payments, loan duration, and interest rate depend on the terms of the refinanced loan. For instance, if you switch to a 30-year mortgage, your payment cycle starts anew and continues for 30 years.

Adjustments:

• Refinancing allows you to:

Reduce Monthly Payment:

• Secure a lower interest rate to save money each month.
• Reduce Total Interest Paid:
• Over the life of the loan, this can add up to significant savings.

Shorten the Loan Length:

• Opt for a shorter term to pay off your mortgage faster.

Change Rate Type:

• Switch from an adjustable rate to a fixed rate (or vice versa).

Access Cash:

• Use your home equity to cover other expenses or debts.

Cancel Mortgage Insurance Premiums:

• Once you’ve built up enough equity, you can drop private mortgage insurance (PMI) payments.

Timing Your Refinance 

• The ideal time to refinance depends on your unique circumstances:

Interest Rate Savings:

• If you can reduce your interest rate by half a percent or more, refinancing may be worthwhile.

Break-Even Point:

• Consider the cost of refinancing. You’ll need to keep your home long enough to realize the savings.

Eliminate PMI:

• If you’ve reached 20% equity, refinancing can help you drop PMI payments.

Remember that refinancing comes with costs, so weigh the benefits against the expenses. If you plan to move soon, consider whether it’s worth it for you!