Refinance Calculator - Home Refinance
Refinancing the home mortgage or home refinance refers to replacement of the current home loan with a new mortgage. The new mortgage is used to pay off the old loan and the borrower will begin making repayments towards the new home mortgage loan. Homeowners opt for home refinance for a variety of reasons such as getting a better rate of interest, reducing the monthly payments, shortening/adjusting the term of the loan, taking cash (equity) off the property, converting an adjustable rate to a fixed interest rate, or a mix of the mentioned reasons.
Homeowners will have to furnish the following details to a lender to avail of home refinance:
- Identification documents like photo ID, and social security card, etc
- Different assets like investments, and retirement accounts, etc
- Income documents like pay slips/stubs, and W-2s for last 2 years, etc
- Your credit report and creditworthiness
- Your varied debts via documents like loan and credit card statements, last 2 months bank statements, bills for property tax, property-owners insurance, and alimony or child support payments, etc.
Different aspects of home refinance
All of us shop around when taking out a home loan for the first time. It is similarly equally important to shop around when refinancing your home mortgage. Comparing different lenders and making them vie with each other for your business will provide you with the upper hand and get you the best deal and interest rate for your home refinance. The better the interest rate on the mortgage refinance, the lower will be your monthly home loan repayments, and consequently you will save more money over the tenure of the home loan.
Any new loan application comes with charges such as closing costs, fees, etc. The same is the case with home refinance. Homeowners who opt for mortgage refinance will have to pay a loan origination fee, an application fee, and an appraisal charge, as well as other costs. It is important for you to check out all the fees and costs associated with home refinance to ensure that you are abreast of all possible charges that mortgage lenders may levy on you during refinancing. Make all the calculations beforehand to ascertain the break-even stage or the point where the money saved on home loan refinance covers the cost of mortgage refinance.
Traditional refinancing and cash-out refinancing: Traditional home refinance means opting for a new loan with a new term and a new interest rate. Cash out refinance means taking out a new loan of an amount that is more than the current home mortgage amount with the extra money going into your pocket. In case of the latter, since the new loan amount is more than the old mortgage, the monthly repayments will most likely increase. Homeowners may opt for cash-out home refinance for reasons such as paying off high-interest debts or credit card debts, pay for tuition and other college costs, buy a car, make repairs or improvements to home, and/or start an emergency fund, etc.