Do Online Refinance Calculators Tell the Full Story?
There are many online refinance calculators, sometimes referred to as breakeven calculators which are designed to allow you to see how quickly you can breakeven with the savings achieved with a refinance vs. the cost of the refinance. This is a very valuable consideration in determining whether or not a refinance would be a good decision for you. If it takes you 5 years of savings from a refinance to breakeven on the costs of the refinance and you only plan on being in the home for 4 years, it may not make sense to refinance unless you have other reasons for refinancing.
Unfortunately, the online calculators I’ve seen only take into consideration the monthly payment differences of each loan vs. the cost of the new loan. To get a truly accurate picture of the benefits of refinancing a loan you need compare the payments and the principal balances of both loans and consider how the costs of the refinance will be paid, either up front or included in the new loan. By not considering all of these factor you may lower your payment and think you are saving money but end up with a much bigger loan balance and not really save money at all. Or your payment may change little or not at all giving the appearance of not saving anything but each year your new loan balance is much lower than your existing loan would be thus creating an even greater saving with the refinance. Your mortgage consultant should be able to show you a comparison of all of these factors and help you set up the refinance to maximize the goals you have.
If you would like to see if a refinance makes sense for you request your own personalized Free Refinance Analysis.
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