Save Thousands with a Mortgage Switching Calculator

Mortgage Switching Calculator

For most homeowners, their mortgage is their single biggest monthly expense. Even a small difference in mortgage rates can mean paying thousands more or less over the life of the loan. That’s why using a mortgage switching calculator is so important – it allows you to easily determine if refinancing to a new mortgage could save you money.

How Mortgage Switching Calculators Work

A mortgage [switching calculator] is a tool that lets you compare the costs and savings of keeping your current mortgage versus getting a new one. You plug in details about your existing mortgage like the remaining balance, current interest rate, and term length.

Then you enter details on the new potential mortgage you are considering such as the new interest rate and fees. The calculator does all the math to determine your new potential monthly payment with the refinanced mortgage.

Most importantly, it estimates how much you could save (or pay more) over the entire remaining mortgage term after accounting for closing costs on the new loan. This lets you evaluate if the upfront costs are worth it for the potential long-term savings.

Average Savings from Refinancing

So how much can the typical homeowner actually save by refinancing their mortgage? Recent data provides some useful benchmarks:

According to mortgage analytics firm Black Knight, homeowners who refinanced in 2021 will save $2,800 per year on average. That works out to over $60,000 in savings over the life of a 30-year loan.

Research by mortgage company Freddie Mac found that refinancing can save the typical homeowner around $3,000 per year. Over a 30-year term, that adds up to a staggering $90,000 in savings.

While refinance savings will vary for each person, these stats show how using a mortgage calculator to find a lower rate can translate into massive savings over time.

When It Makes Sense to Refinance

There are a few key factors that make refinancing to a new mortgage worth considering:

Lower Interest Rates

If mortgage rates have dropped significantly since you first got your loan, refinancing allows you to capitalize on those lower rates for the remaining term of your mortgage. Even a reduction of half a percentage point can add up over decades.

Change in Financial Situation

If your credit score has improved significantly, you may now qualify for a mortgage with a better rate than the one you currently have.

Switch Mortgage Types

You may want to switch from an adjustable-rate mortgage to a fixed-rate one to have certainty around your monthly payments. Or you may want to switch from a longer term (like 30-year) to a shorter one with higher payments but paying less total interest.

Cash-Out Equity

With rising home prices, some owners refinance to a larger mortgage in order to tap their home’s equity and pull out cash for things like renovations or debt consolidation.

While there are fees involved in refinancing, comparing your potential savings over the new mortgage’s full term using a calculator can help determine if it’s worthwhile.

Mortgage Switching Strategies

So what refinancing strategies can maximize the savings a calculator identifies?

Shop Around

Don’t just refinance with your current lender. Get quotes from several banks, credit unions, and online lenders to find the best possible rates and fees.

Consider Paying Points

Some lenders offer you the option to “buy down” the interest rate on your new mortgage by pre-paying some interest upfront as “discount points”. Each point costs 1% of the total loan amount. Paying points can make sense if you plan to stay in the mortgage long enough for the interest savings to exceed the upfront costs.

Consolidate Other Debts

If you have other higher-interest debt like credit cards, you may be able to fold it into your new mortgage at a much lower interest rate through cash-out refinancing.

Adjust the Mortgage Term

Switching to a shorter loan term like a 15-year mortgage results in a higher monthly payment but less total interest paid over the life of the loan. Or you can choose a longer 30-year term for lower payments.

Using a mortgage switching calculator lets you run accurate scenarios for different loan amounts, interest rates, and terms to find the optimal scenario for your situation.

In today’s housing market landscape of rising rates and higher home prices, running the numbers with a mortgage calculator is more crucial than ever for homeowners looking to keep their biggest household expense as low as possible. Even a seemingly small difference in mortgage rates can potentially save you tens of thousands of dollars over the life of your loan.

CEO, Senior Mortgage Broker

Lekha Gurung

Lekha Gurung is an experienced mortgage broker from Sydney who expert in assisting first-home buyers, property investors, refinancing, etc. He has settled more than 300 loans till now. Our Services include First Home Buyers Loans, Investment Loans, Refinancing, Personal Loans, Business Loans, Reverse Mortgage, Credit Default Loan, Low Docs Loan, assistance in property research, and Insurance referral arrangements.

Additionally, Lekha Gurung offers Free Home Loan Consulting and Home Loan Advice. Recognizing the complexities of the mortgage process, these no-cost, personalized consultations are available for free to everyone. Lekha will provide expert guidance tailored to your financial needs, ensuring you make informed decisions in your property financing journey. Simply fill out a form and pick a date to book your Free Session today!

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