'Should I Refinance?' Calculator
Taking out a mortgage plan for your home is known to be a lot of work in which you don't expect at the beginning of a home buying project. Many people make it out to be quite simple: choose a nice house and get a mortgage. Even though it may seem and sound quite easy to do so, in actual fact this is not the case. There are a lot of variables and other financial factors that need to be taken into consideration, especially when it comes to finding the best possible mortgage for your house. Due to a lack of knowledge, most people end up going for the first mortgage plan that is presented to them. It is usually after a number of years where they start to realize that they could have been better off opting for a different plan.
During that time, the thought of refinancing ones mortgage is bound to cross ones mind. Nowadays, refinancing your mortgage has been made to seem as though it will always and certainly save you a lot of money, when in actual fact that is not the case. Even though the initial purpose behind refinancing ones mortgage has always been down to saving money or reducing their monthly payments, there are a number of variables that you need to consider. The reason being, that refinancing your mortgage has an affect on a number of things including taxable benefits. This is where the "should I refinance calculator" is of great use.
SAMPLE: To understand better, let's look at an example. If your original 30 years loan was for $250,000.00 with a 5.000% interest, and you have already paid on it for 60 months, it will reduce your monthly payment if you refinance for a new 30 years period but with a 4.500% interest rate.
If your Federal tax rate is 26.000% and your state tax rate is 5.000%, you were probably paying $1,342.05 per month toward your home. When you refinance at the new rate, you will pay $1,163.21 instead, but your tax benefits will also be affected by this change.
The bottom line is: you will lose $1,492.06 on tax savings (lesser tax benefit is worse) your remaining balance will be $5,917.74 bigger because you will pay less toward your mortgage principal (bigger principal is worse) closing your refinancing process will cost you $3,495.72 Summing up these numbers, we can figure out your total refinancing LOSSES, which will be $174.68.
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