Mortgage Refinance Calculator
Using a mortgage refinance calculator can let you run the numbers on how much you will be able to access any equity in your home, and what your new repayments might be. However as you are making your refinance calculations using an impersonal online tool consider what that calculator is not telling you because you need to understand the financial implications of refinancing your mortgage as they relate to you now and into the future to make sure that refinancing your loan really is a worthwhile option.
Why Your Home Loan Refinance Must Be Worthwhile
- Because your exit fees and application fees must be paid at the time you refinance.
- Refinancing your mortgage costs you time.
- A mortgage refinance shows as an application on your credit report.
Featured Refinancing Home Loan
Apply for Illawarra Home Loans Bank Beater Home Loan and get a low variable rate, beaten down even further by 0.05% p.a. after 5 years, plus no application fee, no valuation and lender's legal fee.
- Interest Rate of 6.07%
- Comparison Rate of 6.35%
- Application Fee of $0
- Maximum LVR With LMI: 90%
- Minimum Borrowing: $250,000
- Maximum Borrowing: $1,000,000
These are the top three reasons why you need to be very sure that refinancing your mortgage is a worthwhile option and you can further consider the worthiness of your refinance solutions with some simple sums below but first you need to understand what you are looking for and why it is so important that you refinance your mortgage responsibly, knowing the solutions to all of the pertinent calculations.
The primary aim of refinancing a mortgage is to save you money because in refinancing you can switch to a loan with a lower interest rate, low monthly fees or features which allow you to save in interest. However before you can save your first cent you must pay exit fees for closing your home loan account with your existing lender, because they are now missing out on thousands of dollars in interest which you would have paid them over the term of your loan, but in paying out your loan to refinance with another lender you are depriving them of those profits and so you will be charged exit fees or deferred establishment fees. In some cases, especially if you are breaking a fixed interest rate term, these fees can be in the tens of thousands of dollars. Then before you have even settled your new home loan you need to pay application fees, appraisal or valuation fees and a number of random administration fees as well.
Refinancing your mortgage is also a very important decision and requires that you spend time comparing all of your options and even if you work with home loan finder who can help you choose the best refinance home loan, you still need to invest time in your comparisons, your phone calls annual meetings to finalise all the paperwork.
It is important to remember that a mortgage refinance will show up on your credit report for two reasons. Firstly if you are refinancing to consolidate debts then you may already have a few unsightly marks in your credit history and if home loan application and a subsequent refinance application also show up on your credit report this can lead to future creditors to form a picture of your financial behaviour which can portray you as more unstable than you really are. Secondly if you refinance without completing the proper comparisons you may find that you refinance to a home loan which doesn’t save you as much as you had expected and so you may start looking to refinance again however numerous home loan refinance applications on your credit history can make it appear as though you are unable to manage your mortgage.
How To Calculate For A Worthwhile Mortgage Refinance
Step one
Consider whether you are facing a short-term problem with your finances or with your home loan because refinancing your mortgage is a medium to long-term solution and should not be used as a quick fix. For example are you struggling with credit card debt after the Christmas rush and could taking advantage of a low or 0% interest balance transfer credit card could help you clear your debts faster? Or are you in a variable-rate home loan and feeling bombarded by a recent, almost consecutive, interest-rate rises when you may be able to speak your current lender and see whether you qualify for any interest rate discounts which can save you more than if you have to pay refinancing costs.
Step Two
Making sure you have enough equity for what you want to do will help you ensure that refinancing your mortgage it is worthwhile because you not only need enough money for your refinance to a new home, to a renovation or to consolidate debt, but you also need to make sure your savings and your budget are not stretched due to the refinancing fees. As a result you need to make sure you have more than enough equity for what you want to do after you have paid all of your fees.
Step three
If you are refinancing to save money on your loan because you feel you are paying too much interest or your annual fee is too high, and out all of the exit costs and deferred establishment fees you will be charged, plus all of the application fees, stamp duty and valuation fees you will be charged on your new refinance loan. Then calculate how much you will save in the first year with your new loan, thanks to your lower interest rate or low fee structure. To make sure a mortgage refinance calculate this is a worthwhile experience you will need to be able to break even within the first 12 months of having your new loan; that is the savings you make in the first year of having a refinance loan must be greater than the costs you had to outlay to refinance.
Refinance Calculations for a Home Improvement or Holiday
If you are not planning on moving house but you still want to improve your lifestyle then you could refinance to access the equity in your home to make improvements, complete renovations or even take your dream holiday. The refinance calculations for the situation require you to complete steps one and two above because you need to know what your home is worth, and the difference between what you owe and what your home is valued at because this difference is the equity which you are planning to use.
Once you have deducted the amount you currently owe from the value of your home you will have the amount of equity in your home. However you will not usually be able to access the full amount as most lenders will only allow you to refinance to borrow up to 80% of the equity available. This rule is for your own good because your lender does not want you to be in a position where you owe more than your home is worth and this is not a position you want to be in either because if you do need to sell your home in times of financial stress you do not want the added stress of the sale of your home not being enough to cover what you owe your lender.
When you have calculated how much of your equity you can access you will be able to choose whether you want those funds available as a lump sum, or whether you want them as a line of credit which you can draw down on when you need it and is especially suited to renovations where a contract is need to be paid throughout the process as this helps with budgeting.
Refinance Calculations to Consolidate Debts
Completing steps one and two again to find out exactly how much equity you have available in your home loan before you go through the costs of refinancing can show you whether you are able to use your home loan to help you clear bad debts such as credit cards or personal loans. In addition to calculating how much you will be able to refinance to, you will also need to:
- Calculate the amount of your debts. This will help you determine whether refinancing is the best option because you will be able to see whether you have enough equity in a refinanced home loan to cover the amount of your debts. Calculating the exact amount of your debts is the same as getting the exact payout figure for home loan if you are moving house because the balance outstanding on a credit card for example is often less than the actual amount required to pay out the debt.
- Calculate your current monthly debt repayments. You will need a total amount so that you can compare what you are currently paying to what you will be paying at a lower interest consolidated refinanced home loan.
- Calculate the new monthly repayments required. In order to do this you will need to refinance your consolidated debt separately to your outstanding home loan amount so that you can make payments on the same date each month and both debts are charged the same low interest rate but you able to see a separate amount for your refinance debt, from your home loan. Your new repayments will be less because you are paying less interest but make sure that you budget to pay more than the minimum amount so you can remove your debts from your home loan as soon as possible. Refinancing to consolidate your debts gets you out of trouble in the short term but if you simply tack your bad debts on to the total of your home loan then you’re actually going to be paying more because you will now be paying your credit cards off as part of a 30 year loan term.
If you need more information about how to make your own mortgage refinance calculations contact Home Loan Finder now.
Related posts:
- Bad Credit Mortgage Refinance
- Refinance Options
- Refinance Fees
- Refinance Real Estate Loan
- How to Refinance an Existing Mortgage with HSBC
- Need to Refinance
- Cash Out Mortgage Refinance
- How Mortgage Brokers Can Help with Refinancing
- Refinance Your Home Loan and Consolidate Debts
- Home Equity Calculator
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