Depending on your circumstances, refinancing your mortgage can be a smart financial choice. While refinancing can lead to significant savings, it can also come at a high cost. Then a mortgage refinancing calculator can come in handy. It gives you a quick overview of the financial pros and cons of refinancing, which should make it easier for you to decide on the best course of action.
What does refinancing a mortgage mean?
Refinancing your mortgage means breaking your current mortgage contract and negotiating a new one, either with the same lender or with a new one. When you transfer your mortgage, you take out a new mortgage loan under different conditions and you pay off your existing one. Doing this before your mortgage is due for renewal can result in early repayment penalties.
How to use a mortgage refinancing calculator?
Do I have to transfer my mortgage? That’s a question that many borrowers face at some point in their lives. And there are a number of variables to consider. A mortgage refinance calculator can help make the decision easier.
Refinancing a mortgage can save you money, but it can also incur significant costs. To help you weigh these pros and cons, the calculator estimates the costs involved in breaking your mortgage agreement and calculates what your new mortgage payment would be under revised terms.
Based on the information you enter, it provides four pieces of information that will be helpful to homeowners considering refinancing. For each scenario (holding on to your current contract and signing a new one), it shows you: the total mortgage amount, the amount of equity you have access to, the penalty paid for breaking the mortgage, and the monthly mortgage payment ( based on the interest rate you select).
Of course, everyone’s situation is unique. While a mortgage refinancing calculator is a useful tool, it’s always good to talk to an expert or mortgage broker, who can discuss all the details of your financial situation before making a final decision.
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When should you transfer your mortgage?
There are a few reasons why you might want to break and transfer your current mortgage contract.
The first is to take advantage of lower interest rates. Negotiating a lower interest rate than your current one can lower your regular mortgage payments, making your mortgage more affordable. It can also save you tens of thousands of dollars over the course of your mortgage. However, any savings that come from lower mortgage payments must be weighed against the cost of prepayment penalties, which can easily add up to thousands of dollars (more on this below).
The second reason you may want to refinance is to access the equity in your home. As you pay off your mortgage, you steadily build up equity in your property. Your equity is the difference between the current market value of your home and how much you still owe on your mortgage. Once you’ve built up enough equity, you may be able to borrow up to 80% of your home’s appraised value, minus the remaining balance on your mortgage. You can use this money for home renovation, investment opportunities or even the education of your children.
This post MoneySense Toolkit: The Mortgage Refinance Calculator
was original published at “https://www.moneysense.ca/spend/real-estate/mortgages/mortgage-refinance-calculator/”