Mortgage Calculator Refinance

Of course, getting the right deal means knowing what kinds of mortgages are available and picking the one that offers the smartest terms for the long haul.  To help you better maneuver the mortgage refinancing puzzle, lets talk about the two main mortgage types to consider:

The gold standard of mortgages, a fixed rate allows you the security of knowing exactly what your payment (and interest rate) will be for the duration of your loan –no matter how long the term is.

Although the average length of a fixed-rate mortgage is 30 years, most experts agree that refinancers should limit the length to the time they have left on their current loan.  For instance, if you have 20 years left on your mortgage right now, it is best to refinance for a 15 or 20 year term.  Of course, the monthly savings you see will be less with shorter loans compared to refinancing with a 30-year term, but you will be savings tens of thousands of dollars in interest over the long term and paying off your home in about the same amount of time. Still, for most, a 1-2% interest rate could still equal a savings of a few hundred dollars each month without adding years of payments to their budget.

Considered the best way to get more house for less money just a few years ago, the reality of adjustable rate mortgages have made many people skeptical since the housing crash of 2008-2009.  Still, some adjustable rate mortgages are still available and can be a smart choice for homeowners looking to refinance their property.

Here is how the ARM works:  the loan starts with a very low interest rate, and goes up periodically, according to its reset schedule.  Some loans reset every year; others every quarter.  That depends on the type of ARM approved.  Here is another thing to consider: some ARMS limit the percentage a loan’s interest rate can reset to; with some even having a maximum interest rate attached to it; while others have no limitations at all (these were the ones that got so many homeowners in trouble the last few years).

For some homeowners, refinancing into an adjustable rate mortgage may make sense if:

• The interest cap is still lower than the rate of your current fixed rate loan.
• You plan to pay your loan off before its term is over (for instance, you are expecting an inheritance; investment payoff, etc in the next 3-10 years).

When looking to refinance your current mortgage, it is important to look at all of the costs involved in the process, to just what that monthly payment will be.  For instance, cutting 1% from your loan interest may seem like a great idea, saving you maybe $100.00 every month, but if you only have 10 years left on your mortgage and you have to take $7,000 worth of closing costs out of your savings account, it may not be worth it.

Take a good look at all of the costs associated with a mortgage refinance including the application fee; points on the loan; title review, taxes, county and state transfer fees, bank overhead fees, etc.

Also, think about the time and energy refinancing your mortgage will take Most people do not realize that when they refinance, they are actually applying for a brand new loan and that will require filling out all sorts of paperwork and gathering loads of financial papers to submit for a bank review. Any glitch in your credit rating over the last few years could result in a denial.  Remember: just because your bank currently holds your mortgage does not mean they are willing to approve a new loan.

A lot of the mortgage rules have changed in the last few years, making it more and more difficult for borrowers to get approved – even refinancing borrowers. So be sure that your credit rating and financial life are in pristine condition before even attempting to refinance.  If you have experienced any financial hardships in the last few years, be sure to speak with a loan officer before applying for your new loan to see the best way to present yourself and your application to prove that you are responsible enough to warrant a mortgage refinance.

Refinancing a mortgage is not as simple as it once was.  Still, with interest rates at an all-time low it is worth checking out to see if you qualify for a lower interest rate and cut in your housing payments.  With a little work and persistence you just might find yourself on the winning end of the mortgage crisis, saving tends of thousands of dollars over the life of your loan.