1. What is House Refinancing?

House refinancing is the process of replacing your existing mortgage with a new loan, typically to secure a lower interest rate, change the loan term, or access home equity. This calculator helps you estimate your new monthly payments when refinancing.

2. How Does the Calculator Work?

The calculator uses the standard PMT formula for loan payments:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

Explanation: The formula accounts for both principal repayment and interest charges over the life of the loan.

3. Importance of Refinance Calculation

Details: Calculating your potential refinance payments helps determine if refinancing makes financial sense by comparing new payments to current ones and considering closing costs.

4. Using the Calculator

Tips: Enter the new loan amount, annual interest rate, and loan term in years. The calculator will show your estimated monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: When does refinancing make sense?
A: Typically when you can secure a rate at least 0.5-1% lower than your current rate, or when you need to change your loan term.

Q2: What costs are not included in this calculator?
A: This doesn't account for closing costs (typically 2-5% of loan amount), property taxes, or insurance.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms lower monthly payments but increase total interest.

Q4: What's the difference between rate and APR?
A: The rate is the interest charged, while APR includes fees and reflects the true annual cost of borrowing.

Q5: Should I refinance to cash out equity?
A: This depends on your financial goals and alternatives. Consult a financial advisor for personalized advice.