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Refinance Calculator: What It Is and How to Use It
Refinancing is not a hard concept to grasp. You obtain a second loan for an amount that’s usually higher than the remaining balance on the current loan. For instance, assume your home’s market value is $160,000. Your mortgage balance is $90,000. It’s possible to obtain a new loan of about $120,000 to clear the $90,000 balance. And you’ll have $30,000 as cash in hand to do as you please.
Let us start with the data points you need to use the calculator refinance. Information on the current loan should include:
- Remaining balance on the current loan
- Loan duration
- Annual percentage rate
- Origination date
Details on the new loan:
- Loan amount
- Interest rate
- Refinance fees
Using our free refinance calculator, you’ll instantly get a comparison of your current monthly payments versus new repayments. It gives you the chance to know how much you stand to save.
Should I Refinance
The refinance loans calculator gives you the facts you need for refinancing your current loan. The reason most people consider refinancing their mortgage is to obtain a cash-out.
Simply put, cash-out refinancing gives you the ability to convert the current equity you have built in your home into cash. It’s requisite to have 20% equity built up to apply for a cash-out. There are refinancing fees that may be up to 3% of the new loan.
The online refinance calculator also helps you to compare a cash-out option versus alternative credit options like applying for a home equity line of credit (revolving credit), home equity loan, or personal loan.
When to Refinance
“When to refinance?” is an important question to ask. First off, there are several situations when it makes sense to refinance your loan. Refinance when you…
1) Want to save cash: If the new loan comes with a lower interest rate, you’re probably going to pay less in interest on the new loan, resulting in savings.
2) Have better credit scores: By making on-time monthly payments towards your current loan, your credit score may have improved remarkably. Better scores give you access to larger loan amounts at the best rates.
3) Need hard cash: Applying for cash-out refinancing is feasible when you need money for renovations, repair costs, big purchases, etc.
4) Want reduced monthly payments: Discounted interest rates or a longer loan term result in reduced monthly payments.
5) Want to pay off a loan faster: Are you still wondering: “Should I refinance?” Well, it might allow you to obtain a new shorter loan duration, for instance, one reduced from 30 years to 15 years.
6) Debt consolidation: Are you burdened by multiple debts? You can refinance and consolidate several debts into a more manageable loan.
Pitfalls of Refinancing
The simple refinance calculator highlights many benefits of refinancing. However, there are potential pitfalls not readily apparent:
1) The longer the loan duration, the higher the interest.
2) Some lenders don’t want borrowers to clear off loans before the due date. They charge steep refinancing costs or prepayment penalties.
3) Getting a new loan for an extended-term may increase the duration you’re in debt.
Using Our Cash Refinance Calculator
Before using our best refinance calculator consider your financial goals. Do you plan to be debt-free in a couple of years?
It’s also essential to know the refinancing breakeven point, which refers to the date you’ll have cleared paying the refinancing costs on the new loan. It should be shorter than the new loan term. For the best rates on refinancing loans, check out the refinance calculator and apply right here at CashSpotUSA.