A Loan Calculator

One way to know for certain if a new loan to refinance a mortgage is right for you is to run or “crunch” the numbers through a loan calculator. Loan or refinance calculators are readily available on the internet – almost any site that handles loans or refinancing of mortgages has a loan calculator.

What types of things can you learn from a loan calculator? If you are thinking for making a home purchase a loan calculator can tell you what your monthly loan payments will be based on the amount of the loan, the interest rate, and the length of the loan. If you are thinking of refinancing a mortgage, your loan calculator will tell you what your new payments will be and should also tell you what your breakeven point will be.

Your breakeven point is simply how many months it will take before the monthly savings that you realize from refinancing a mortgage to a lower interest rate or a longer mortgage will pay for the fees involved in refinancing. Generally, the term is somewhere between two and three years, depending on the fees.

When you are using a refinancing loan calculator it will ask for the fees that will be charged on your loan. If you don’t know you should simply enter $2,000 for a rough estimate.

How often should you crunch the numbers on your home loan? A good rule of thumb today is to run all the numbers through a refinance loan calculator every time interest rates drop by one percentage point. You may find that you can save enough to make refinancing worthwhile when rates drop even a little less than a full point, but you should definitely check every time rates drop by a full point.

To use a loan calculator you will need to start with the amount of your original loan. Note: This amount is not what you still owe on the loan, but the full amount of the original loan originally. You will need to enter the length of the loan, i.e., 15-years or 30-years. Rather than how much time is left on the loan, this term is the length when the loan was first initiated.

Next they will ask how long you’ve been paying on the loan and what your current interest rate is. Finally they’ll ask about the new loan. They’ll want to know the amount of the new loan, the interest rate on the new loan, and for how long the new loan will be. They will also ask about closing costs. If you don’t know, $2,000 is a fair estimate.

Run the numbers as often as you want, putting in different variables each time until you find the loan that makes the most sense for you. Once that is done, you will then be ready to go out and get it!

Loan calculators, as well as, refinancing calculators, are an incredible invention. It is recommended that you make liberal use of them whenever interest rates start heading downwards.