Are you wondering if refinancing your mortgage is right for you? In the right situations, refinancing a mortgage can be a money saving move that can lower your interest rate and your monthly payments. Before you speak to a lender, it’s best to get an idea where you stand with a refinance. Use our mortgage refinance calculator to estimate what you can save with a home mortgage refinance.
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How to use the home mortgage refinance calculator
Our refinance calculator is easy to use. Just fill in the boxes and we’ll do the rest. You can make adjustments to your current interest rate, your current mortgage, and your new rate and mortgage to see what the outcome will be.
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Glossary of terms
- Interest rate
- Loan term
- Origination Year
- Refinance Fees
- Cash Out
- Break Even
Interest rate
Interest rate is the percent fee you pay to your lender for loaning you money to purchase a home.
Loan term
Mortgage terms aren’t limited to 30 and 15 years. Plenty of buyers prefer other options like 10-year, 20-year, 25-year, 40-year, and even five-year terms, based on their monthly income and budgetary goals.
Origination Year
This is the year you initially received your mortgage from your lender.
Refinance Fees
There may be a few fees when it comes to refinancing. Every refinance is different, but some common fees associated with refinancing a mortgage are application fees, origination fees, credit report, and home appraisal.
Cash Out
Cash out means to replace your current mortgage with a larger loan in order to pull cash out to use for personal financial needs.
Break Even
Break even is an important calculation to know when considering a refinance. Break even tells you the amount at which the cost of refinancing a mortgage and remaining with your current mortgage amounts to zero (no loss or gain). Knowing this number can help you understand if refinancing is a good choice for you.
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Commonly Asked Questions
For most buyers, obtaining a mortgage and buying a home is the largest financial undertaking they will complete in their lifetime. Homes appreciate in value and are typically considered a sound investment for most applicants.
But committing to repay a large amount of money can be confusing. Let’s look at the most commonly asked questions that pop up during the process.
Refinancing a mortgage is when you replace your current mortgage with a new one. There are many reasons to refinance a mortgage but the most common are changing loan terms, locking in a better interest rate, lowering your monthly payment, or pulling cash out of your home equity.
Depending on your particular situation and goals, refinancing can be a good option. Talk to one of our experienced mortgage lenders to see if refinancing is right for you.
This is another question that is dependent on your specific situation and goals. Typically, when current interest rates fall below the interest rate of your mortgage, it may be a good time to consider a refinance. There are many other things to consider however, so we recommend speaking with a mortgage professional.
Capital Bank makes refinancing a mortgage fast and easy. Simply apply to refinance your mortgage and our lenders will consult you with the best refinance options for your needs and we will handle it from there.
There are many variables that can determine how long it takes to refinance a mortgage, but generally speaking, it takes around 30 – 45 days to refinance a mortgage.
Refinancing a mortgage can vary in price depending on the amount and type of refinance option you choose. Most refinances cost around 2% to 6% of the loan amount.
There are some no-cost refinance options out there that allow you to finalize a refinance without closing costs. Most of these options will require you to choose a higher interest rate or larger loan balance.
There are no legal limitations to the amount of times you can refinance a mortgage. Check with your mortgage lender to see if they have any limitations on the amount of times you can refinance a mortgage.
Generally, your mortgage lender will ask you for your pay stubs, tax returns/W-2, credit report, and a review of your assets and liabilities. Check with your mortgage lender to ensure you have all of the required documents.
To qualify for a refinance, take a look at your debt-to-income ratio. The new monthly mortgage payment shouldn’t be more than 30% of your monthly income. To refinance $400K over a 30-year fixed term with an interest rate of 3.5%, you’ll need an income of approx. $6000/month. (This is an estimated example – rates and other factors are subject to change.)
To qualify for a refinance, take a look at your debt-to-income ratio. The new monthly mortgage payment shouldn’t be more than 30% of your monthly income. To refinance $200K over a 30-year fixed term, you’ll need an income of approx. $5,200/month. (This is an estimated example – rates and other factors are subject to change.)
It depends if you’ll be in the home long enough to reach the “break-even point”, which is the date at which your savings outweigh the closing costs you paid to refinance.
If you save $200 a month and have a refinance closing cost of $4,000, you’ll need to stay in the home for 20 months to break even.
With a 70k salary, you may be able to afford a house from anywhere between $200,000 to $350,000 (this is an example estimate – factors such as debt can affect how much home you can afford). Instead of thinking of the total price tag of a home, look at whether you can afford to borrow the money it will cost and can repay the loan in monthly payments.
With a 50k salary, you can likely afford a house anywhere within the range of $180,000 to $300,000. It will depend on several factors such as your location, credit score, current debts, mortgage rates, down payment, and others.
With an income of 80k a year, you can afford a home within the price range of $240,000 to $320,000. Based on a 3.5% interest rate and 10% down payment, you can buy a $272,000 home with a $1,599 monthly mortgage payment. Please keep in mind, total debt-to-income ratio, credit score and other factors may influence the price of the house you can afford. This estimate only includes the principal and interest amounts. Actual payment obligation will be higher.
With a 60k salary, you may be able to afford a mortgage in the range of $120,000 to $150,000. The general rule of thumb is that you can afford a mortgage of 2 to 2.5 times your annual income.
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Conclusion
In conclusion, the primary factors for mortgage approval are credit score, income, existing debt, and down payment. As a savvy consumer, you can run scenarios with various inputs to find the right mortgage lending solution for you.
Once you procure a mortgage, be sure to pay your payments on time and include extra principal payments as available. These actions will ensure you are able to refinance should mortgage rates become more desirable.
Home-ownership is a journey and a dream for most Americans. Use the research we’ve compiled to make the most of your adventure toward owning a home.
Disclosure
The information provided by these calculators is for illustrative purposes only. Results do not reflect all loan programs and are subject to specific loan limits. Qualification, rates and payments will vary based on timing and individual circ*mstances. This is not a commitment to pre-approve or lend. Be sure to consult a financial professional prior to relying on the results. The calculated results are intended for illustrative purposes only and accuracy is not guaranteed.
