If mortgage payments are suddenly higher, the most probable aspect to blame would be the ever-rising mortgage interest rates. The reason is that since 2004 the Federal Reserve Board has raised the fed-funds rate, which influences mortgage interest rates, 17 times. In recent years, many people have taken advantage of near-record-low interest rates while scooping for real estate properties. In order to make mortgage payments even lower, many signed up for variable-rate home mortgage refinancing options.

One of the benefits of variable is that you get an extra-low interest rate for the first few years of the loan, and then, often every year, it gets reset to reflect the actual market movements in interest rates. For a “5-1” variable-rate mortgage scheme, the loan is fixed at a low introductory rate for five years and then begins floating in relation to interest rates each year after that. However, if the market interest rates surge up, the rate of your own will consequently rise, albeit caps for regulating rates from rising too much are in place.

The risk is that one could end up paying 10% or more on a home mortgage refinancing in later years. This is not quite apparent in fixed-rate home mortgage refinancing wherein one’s loan will be locked at a rate, say 6.25%, until the whole loan is paid. The risk is not at all senseless—that is if you plan to leave the home after a few years, variable-rate home mortgage refinancing can make a lot of sense. You get an extra-low rate initially, and you are not likely to be around if and when rates escalate.

Not everyone is fortunate enough to figure out such a trick. Some are blinded by the chase of the cheapest rates out there, grabbing variable-rate mortgages for the really low introductory rates that these offer despite planning to stay in their new home. So now that the tide seems to be turning, and rates are rising, the potential heartache for a lot of people is looming. According to a report from ACORN, the national community advocacy group, about 75% of subprime home loans were variable-rate mortgages.

Many people have opted for even riskier home loans than ordinary variable-rate mortgages. Some signed up for interest-only loans and negative-amortization loans, and according to a Los Angeles Times article, "substantial numbers of borrowers using interest-only and payment-option loans have modest incomes and could already be stretched financially."

There are some suggestions that can mitigate such risks. The most reasonable would be to switch to risk-averse options such as 15-year or 30-year standard amortization schemes. Another practical tip suggests switching to an interest-only mortgage option if full payments are currently not feasible. The positive feature about interest-only payments is that these would not result in still-higher principal debt balances to pay off later.

Sandra Block offered some beneficial advice to potential borrowers in a USA Today article. She explains, "Look for lenders that have raised their borrowing limits for conforming loans. Rates on conforming loans, which are loans that lenders can sell to Fannie Mae and Freddie Mac, are a quarter to three-quarters of a percentage point lower than those for jumbo loans."

If you are in the process of taking out a mortgage to purchase your home or refinancing your existing mortgage it is important to understand you rights under the Real Estate Settlement and Procedures Act (RESPA). Here are the basics of the protection RESPA provides homeowners to help you avoid predatory lenders that want to take advantage of you.

The Real Estate Settlement and Procedures Act protects homeowners in the United States from unfair lending practices. RESPA outlines rules for disclosure mortgage lenders are required to follow. Under RESPA you have the following rights:

• You have the right to disclosure about the fees and total cost of your loan, including the interest rate, lender fees, points, and closing costs.

• You have the right to request the lender’s Good Faith Estimate outlining all mortgage fees and settlement charges before agreeing to pay the fees.

• You have the right to know which application and lender fees are not refundable if you decide to cancel your loan application.

• If you are working with a Mortgage Broker you have the right to know exactly what the broker will do for you and how the Mortgage Broker will be compensated for their services.

• You have the right to ask questions about any fees or terms you do not understand on your loan contact or supporting documentation.

• You are protected against lending discrimination based on your race, color religion, sex, marital status, age, national origin, or if you receive income assistance from public funds.

• You have the right to know why your mortgage application is declined and to receive the HUD settlement booklet entitled “Buying Your Home.”

You can learn more about your mortgage options, including common mistakes to avoid by registering for a free mortgage guidebook.

This article is not just about the details of California Home Loan Mortgage Rates but this article is all about the fine points of California Home Loan Mortgage Rates. You must have read a lot of articles about California Home Loan Mortgage Rates. So, what is the use of reading one more here. Well, you would be able to find that if and only if you read this article in the first place.

The California Home Loan Mortgage Rates are low at this point of time. The California Home Loan Mortgage Rates are connected to the national interest rate and controlled by national housing market interest index. The national interest rate is controlled by secondary markets which are closely monitored by the Government since the whole economy depends on them. The economy at this time coupled with the housing market situation has brought about this change in California Home Loan Mortgage Rates.

Reading this article on California Home Loan Mortgage Rates must have made you aware of the fact that we were not exaggerating in our claims when we said that we would provide you with an article with a difference and now you can see for yourself.

We were not thinking of wasting your time when we thought of providing you with this article. And now when you are yourself reading this article, don’t you think that we were sincere in our efforts?

Home Loan Mortgage Rates in California do not really appeal to a prospective buyer especially if he is from a different state. These rates can inject more frustration than excitement into his life since the cost of living in California is high in comparison to other states. It really takes a lot of intellect and skill to play around with different options to reduce interest rates and payments in order to make California Home Loan Mortgage Rates affordable.

So, do you still think that you know everything that was to be known about California Home Loan Mortgage Rates? Don’t you feel that there were so many things that were to be known about California Home Loan Mortgage Rates?

The California Home Loan Mortgage Rates fluctuate daily. In order to get the feel of it, it is advisable to wait and watch and see the trend before making a decision. These mortgage rates come in with a variety of different options. There are interest only rates, standard fixed rates, adjustable rates and variable rates. All these rates have to be taken into account while making a decision in order to get the best rates possible.

Most of the articles go on rambling about the same content and that is why it seems that there is no need to read any more articles when you have read two or three articles on any topic but can you really say the same about this article about California Home Loan Mortgage Rates.

Interest only California home loan mortgage rates are the lowest since the buyer or borrower is paying only the interest component. This apparent low level of payment options makes it interesting and attractive to borrowers

People across the nation are searching for alternative financing solutions for home refinancing, because more likely than not they are already locked into a great rate for thirty years. Take a look at the mortgage refinance loan's little brother, the second mortgage. This junior loan is usually smaller than the older, more senior mortgage loan, but it is more flexible and it may not be as difficult to deal with. Examine the benefits of the younger more agile second mortgage and you may reconsider refinancing your 1st mortgage.

Second mortgages require no private mortgage insurance (pmi).

You can borrow up to 125% of the appraised value of your home.

2nd Mortgage loans cohesively subordinate to your existing mortgage.

Flexible credit lines allow you to access money any time.

Home equity lines of credit can be converted to a fixed rate term.

Second mortgage loans are great financing tools for getting cash out to finance, pool construction, debt consolidation, and even purchase a 2nd home. According to a recent study by Harvard University's Joint Center for Housing Studies those who own second homes are more likely to reduce spending on their primary residence relative to their income than those who do not own second homes. This Harvard study notes "compelling evidence that the choice to adjust (housing) consumption by adding a second home rather than by increasing the value of the primary residence must lower demand elasticities for primary homes among second-home owners even more."

Whatever kind of loan you choose when looking for cash out using you home, make sure that you understand how the loan works. You need to know how the interest is being calculated and if you you have a pre-penalty for early pay off. Above all, take the money you get from the home equity loan and invest it wisely.

If you are planning to buy a house, you should consider whether you need a 30 year, or 15 year fixed mortgage rates for your monthly payments. It would be ideal if you could have the house paid off as soon as possible, but there are other things that you should look at before you sign any papers.

If you are interested in purchasing a home for your family, you should make sure that the interest rate does not fluctuate over the course of the loan. Lenders may tempt you with deals that are too good to be true, but this often means that they actually are too good to be true. Loans that have 15 year fixed mortgage rates maintain the same amount of interest throughout the duration of the loan. This loan is ideal for people who don’t like surprises.

When my wife and I were looking at houses for sale, we decided to look for loans that have 15 year fixed mortgage rates. We wanted to pay off the house as soon as possible, but we didn’t want to have problems with paying high monthly payments. In addition to considering 15 year loans, we also checked out loans that spanned 30 years as well. We didn’t like the thought of having a mortgage as we were approaching our retirement, so we were hoping to find an ideal loan with 15 year fixed mortgage rates.

However, after taking everything into consideration, my wife and I decided to take a 30 year loan instead. There were significant reasons that led to this decision. The most important factor is that my wife was five months pregnant. This means that her contribution to our monthly finances will be unreliable since she will be raising our child at home. Since loans with 15 year fixed mortgage rates require a high monthly payment, we didn’t want to get in over our heads.

Taking out a 30 year loan would lessen our monthly payments. We also made extra payments throughout the year to make the principal shrink faster. Making a handful of extra payments throughout a twelve month period can knock years off your loan. Although we would have preferred a loan with 15 year fixed mortgage rates, we had to consider our financial needs and abilities. Fortunately, things worked out well for us.

It can provide you with additional finance for any purpose you may think of by securing a loan for you. This will provide you with competitive interest rates and low monthly payments so you can enjoy cheap financing. In order to understand how home equity loans work, you need to be familiar with certain concepts. Mainly, you should know what equity is and how it is calculated. Then, you’ll be able to understand why home equity loans provide such benefits and the risk that requesting this kind of loans implies.

Defining Equity

Equity is the difference between the value of an asset and the amount of debt that it secures. It is the remaining value of a property when the property’s value exceeds the amount of debt that the asset guarantees. This equity can be used to secure another loan. Just like a home is used as collateral for a home loan, the same property (specifically its equity) can be used as collateral for a home equity loan or line of credit.

It is necessary to note that the value of the property to take into account is the appraised value of the asset (the current value) and not the purchase price of the property. The value that is taken into account is the amount of money you could get if you were to sell the property in the market.

Calculating Equity

In order to calculate equity you need to subtract any mortgages or liens hold against the property to the appraised value of the asset. For example: If you own a house worth $100,000 which has a mortgage loan with $60,000 of outstanding debt, the equity on your home is equivalent to $40,000. This remaining amount can be used to secure another loan.

Bear in mind that mortgages are not the only debts that can be subtracting value from your property, outstanding home equity loans, other liens and judicial embargos can reduce the amount of usable value of the asset. In order to correctly calculate the equity you need to consider all the above when subtracting the overall debt held against the property.

Benefits of Home Equity

Home equity loans provide low interest rate financing compared to unsecured loans. The interest rate charged for home equity loans rarely exceeds 12% while the interest rate charged for unsecured loans can usually reach 18%, 20% or even more. The secured nature of home equity loans keeps interest rates low by reducing the risk involved in the lending process.

Home equity loans also offer higher loan amounts and longer repayment programs. This combination provides great flexibility as you can request significant amounts and obtain low monthly payments by extending the loan length. When it comes to unsecured loans not only you can’t obtain high loan amount but you can’t repay it throughout long repayment programs either.

Yield Spread Premium is a technical term for your Mortgage Broker robbing you blind. You won’t find the term in any of your loan documents; however, you could be overpaying for your new mortgage and not even know it. How can you avoid overpaying for your new mortgage? Here are the basics of Yield Spread Premium and how you can avoid paying too much for your mortgage loan.

Mortgage brokers come in two flavors. There are traditional brokers regulated by RESPA legislation, and Broker-Banks that are not subject to disclosure laws under the Real Estate Settlement and Procedures Act. It is difficult to distinguish a mortgage broker from a broker bank. Broker-Banks are a particularly evil variety of mortgage lender that does not have to disclose any of the fees they overcharge you for you home loan. Mortgage brokers operate the same scams; however, they are required to disclose under RESPA. Here’s how their scams work.

Mortgage brokers and Broker Banks make their profits by up selling you on the interest rate you qualify on the mortgage loan. Suppose a broker talks you into taking out a mortgage for 6.5%. You agree because this seems like a fair rate the way the economy has been going. What you don’t know is that the lender actually qualified you for a 6% loan and the broker sold you on 6.5%. Why would the broker do this? They are after all independent agents correct?

What you don’t know about your mortgage broker, unless you know where to look in your mortgage documents and will never know about your Broker Bank because they are not required to disclose their profit margin, is that they receive a bonus from the lender for overcharging you on the interest rate. You probably had to pay the broker origination points for the loan in the neighborhood of 1-1.5% of the loan amount. Did you know the broker received an additional 1-1.5% of your loan amount for each .25% they overcharged you on the interest rate? This bonus is called Yield Spread Premium (YSP) when it’s paid to broker and Service Release Premium (SRP) when the scam is by a bank.

How can you avoid being taken advantage of by your broker or bank? First of all, never, ever take out a mortgage from a bank. Second, you must determine if the broker you are working with is an actual mortgage broker or a Broker Bank. Chances are they will not tell you if you ask; however, there is an easy way to tell. You can learn more by registering for a free mortgage guidebook.

Many home buyers close their loans, make their payments and don't think about their mortgages again. They don't consider refinancing when they should. If you are among these inattentive homeowners, here are four truths about mortgage refinancing that may surprise you.

Truth #1 – Mortgage Refinancing can save you money. If interest rates have dropped since you got your original loan, refinancing can reduce your monthly payment. When you refinance, you can also choose to shorten your loan term, meaning you will pay less money in interest over the life of the mortgage.

You could also save money by switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. The interest rate on an ARM is based on an index such as the LIBOR or the U.S. Treasury Bill. If they go up, so do your payments. By refinancing to a fixed-rate mortgage, you can prevent payment increases. (Your monthly payment might still increase due to changes in property taxes or insurance, but your principle and interest amounts will stay the same.)

If your original mortgage was for more than 80 percent of your home’s value, you are paying private mortgage insurance (PMI) as part of your monthly payment. As the value of your home increases and the principle on your mortgage decreases, you can get rid of PMI by refinancing for less than 80 percent of your home’s value.

Truth #2 – Mortgage Refinancing is a smart way to access your equity. In the second quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances. Homes refinanced during this time had appreciated 33 percent on average since the original mortgage was taken out. The median age of the mortgage was 3.2 years.

“Borrowers who are looking for an inexpensive way to finance home improvements or business investments, or to consolidate high cost debt, are turning to cash-out refinance,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “These borrowers are often willing to refinance into higher rates on their first lien mortgages. . . This is the second consecutive quarter in which the median refinance borrower increased the rate on their first lien mortgage.”

Truth #3 – Mortgage Refinancing is still very popular. According to Frank Nothaft, Freddie Mac chief economist, “The staying power of refinance activity has been much stronger than we initially thought . . . borrowers are reacting to both incentives to cash out home equity through refinance and incentives to change their mortgage as they hit an interest rate adjustment.

Taking a mortgage on your home is the largest and the longest debt that you will take in your life. However, investing in a house is a necessity, so you must be smart and try to see how you can save by paying more on your monthly mortgage payments. Your mortgage statement should show the amount repaid towards principal and interest. Calculate how much extra you can afford to add to your monthly installment based on your income and expenditure.

Why should you want to know about savings on your mortgage payments?

Its really as simple as controlling the future of your finances and saving thousands of dollars towards interest payments every year. You may never have enough finances to pay off the mortgage right away, or enough equity in your home to opt for a refinance. But you can make additional payments to reduce the accruing interest on your mortgage. This is important because interest payments over the life of the mortgage amount to nearly twice the value of the home. You must realize that the mortgage accrues interest every day and your lender has a vested interest in a long-term mortgage. So you be wiser and add just $50, $100 or $500 depending on your monthly budget, towards paying off the principal amount of your mortgage.

How can a mortgage calculator help you calculate the savings on your monthly mortgage payments?

You will usually take a 15 year or a 30 year mortgage. Manually calculating the savings every month of this long tenure is tiring and you are bound to make errors. Instead it is better to use an additional payment mortgage calculator available at several financial websites for the same.

Example

For example, for a loan amount of $120,000 with a 30 year mortgage, the monthly mortgage repayment at 9% works out to be $733.76. If you simply add $100 to this monthly payment, you can repay the mortgage in 20 years and nine months with a huge saving of $82,000 in interest. This is because your additional amount goes towards repayment of the principal. The $100 you pay in the first month would actually be $270 with interest. The next month you save $268 and so on. So you save about ten years and more than eighty thousand dollars in interest by just making an additional payment of $1200 a year.

Additional points to consider when increasing the monthly mortgage repayment amount.

* Ensure that the additional amount goes towards repayment of the principal amount. Your lender is quite likely to add it to the interest amount due for the next monthly installment.
* The lender may apply only a small amount as repayment of principal and deduct the rest as service charge. To avoid any such mistakes send a separate check with precise instructions stating that the additional amount is repayment of the principal.
* Check to see that the lender has no penalties for early repayment.
* Enquire if you can make bi-weekly payments instead of a lumpsum monthly payment. Ignore this option in case the processing fee is high.

How not knowing about this saving can hurt you

The mortgage calculator helps you automatically calculate the interest savings in pre-paying the mortgage. You simply enter the additional payment you will make each month and the time from which you will do so. The calculator will give you a comparison of the savings in interest instantly. Moreover, you can start by just adding $100 to your monthly installment and still benefit. However, ignorance of this fact means that you carry the interest burden for a longer time and waste money that can be better used elsewhere.

If you are a homeowner in the process of refinancing your mortgage, doing your homework will save you thousands of dollars. Before you can make sense of mortgage offers and determine which offer is a better loan, it helps to understand how mortgage lenders operate. Here are the basics of mortgage markets and the different types of lenders you will encounter refinancing your mortgage.

There are two basic markets in the mortgage industry. The first is the Primary Market, where the borrower obtains their mortgage from the loan originator. The Secondary Mortgage Market is where lenders buy and sell debts that are pooled and insured. How does this affect you, the homeowner? The value of your mortgage on the secondary market is determined by how much the loan’s originator overcharged you. Profits on the secondary market are icing on the cake for mortgage lenders.

Back to Primary Mortgage Lenders: these are your banks, credit unions, mortgage banks, internet portals, and home builder/Real Estate Company owned lenders. When you apply for your mortgage you are dealing with retail mortgage lenders. These lenders have one goal for your loan: overcharge you as much as they can, and if possible without your knowledge. Banks and mortgage banks have an advantage as they are exempt from all the disclosure laws in the United States that protect homeowners. This is why you should never take out a mortgage from your bank.

The Secondary Mortgage Market includes pseudo-government for profit companies Fannie Mae, Freddie Mac, and Ginnie Mae. These organizations regulate the mortgage industry for the government and create mortgage based investments from secured debts. There are also investors in the secondary market that purchase debt from primary lenders looking for a return on their investment. You may be asking yourself, “Why do I need to know any of this?” The answer is simple, your mortgage loan is like any other product you purchase. If you neglect to shop around you will not find the best price.

You can learn more about shopping for the most competitive mortgage loan and not overpaying the loan originator by registering for a free mortgage guidebook

A mortgage is the single largest loan that you will take in your life. A mortgage extends for a minimum of 15 years and a maximum of 30 years. To take on such a large debt you must be aware of your financial capability and future liabilities.

Why should you want to know your annual earning to afford your house payment?

If you take a mortgage, you need to make monthly repayments for the next 15 or 30 years. In that case, your monthly earning must have provision for the mortgage installment and other monthly expenses. Therefore, you must estimate your annual earning and then take a mortgage that fits within your budget.

How can this information help me in arriving at the amount I can take as mortgage for my home?

Simple economic theory states that your monthly mortgage repayment, including the principal and interest must not exceed 25% of your gross monthly income. Add to this real estate taxes and property insurance that adds another 3 to 6 percent. Besides this, you have your food and other monthly expenses and federal taxes that you pay.

Example

We assume that you will make at least 20% down payment for the mortgage in addition to 2 to 5% as closing costs. Visit any home finance website and they will give you indicative cost per thousand dollars for a 15 year or a 30 year mortgage at varying rates of interest. So, if you finalize a house for $150,000 and make a down payment of $30,000, then at 9% for a 30 year mortgage, the monthly payment using figures from the table provided works out to $8.05 per thousand. This means a monthly installment of $ 966 or $11592 per annum. Since we assume this is 25% of your gross income, you need to earn at least $46,368 per annum to service this mortgage. Similarly, if you feel you can take a bigger house then you can go for a 15-year mortgage with a higher monthly installment. Moreover, the equity on a 15-year mortgage builds up faster so you can go for a refinance or move to a bigger house.

How to calculate your annual income to get an affordable mortgage

You can generally qualify for a mortgage that is twice your annual income. However, lenders assess your net worth, your liabilities, and costs of owning the new house before sanctioning the mortgage.

Let us now consider that your monthly expenses include mortgage payments, property taxes, insurance, and maintenance costs. You may need private mortgage insurance if your down payment is less than 20% of the mortgage amount. This is usually 0.5 to 1% of the mortgage amount and a monthly deduction. This insurance amount may increase marginally over the years. Next, calculate your assets including income, savings, pensions, and equity in real estate. Your liabilities include car loans, monthly expenses, and credit card loans. Your emergency funds should include savings that can provide for six months living without any income. Your net worth is the net of your assets minus liabilities. Subtract emergency funds from net worth to get a sum that is available for losing costs and down payment. Next, get the sum of annual expenses and operating costs, minus them from your income. Then add the cost for rent and insurance to get an amount that you can spend on your house in a year. Therefore, your annual income must be almost double of this amount.

Advantage of using a mortgage calculator

As explained above the calculations are detailed and you must not make any errors. It is therefore better to use affordability calculators available at most financial websites to estimate your annual income.

Disadvantage of not using a mortgage calculator

You will end up buying a bigger house and then take a huge mortgage loan that you cannot afford. You may default on your repayments, severely affecting your credit rating. This will hamper your future chances of credit and affect your credibility among lenders

If mortgage payments are suddenly higher, the most probable aspect to blame would be the ever-rising mortgage interest rates. The reason is that since 2004 the Federal Reserve Board has raised the fed-funds rate, which influences mortgage interest rates, 17 times.

In recent years, many people have taken advantage of near-record-low interest rates while scooping for real estate properties. In order to make mortgage payments even lower, many signed up for variable-rate home mortgage refinancing options.

One of the benefits of variable is that you get an extra-low interest rate for the first few years of the loan, and then, often every year, it gets reset to reflect the actual market movements in interest rates. For a “5-1” variable-rate mortgage scheme, the loan is fixed at a low introductory rate for five years and then begins floating in relation to interest rates each year after that. However, if the market interest rates surge up, the rate of your own will consequently rise, albeit caps for regulating rates from rising too much are in place.

The risk is that one could end up paying 10% or more on a home mortgage refinancing in later years. This is not quite apparent in fixed-rate home mortgage refinancing wherein one’s loan will be locked at a rate, say 6.25%, until the whole loan is paid. The risk is not at all senseless—that is if you plan to leave the home after a few years, variable-rate home mortgage refinancing can make a lot of sense. You get an extra-low rate initially, and you are not likely to be around if and when rates escalate.

Not everyone is fortunate enough to figure out such a trick. Some are blinded by the chase of the cheapest rates out there, grabbing variable-rate mortgages for the really low introductory rates that these offer despite planning to stay in their new home. So now that the tide seems to be turning, and rates are rising, the potential heartache for a lot of people is looming. According to a report from ACORN, the national community advocacy group, about 75% of subprime home loans were variable-rate mortgages.

Many people have opted for even riskier home loans than ordinary variable-rate mortgages. Some signed up for interest-only loans and negative-amortization loans, and according to a Los Angeles Times article, "substantial numbers of borrowers using interest-only and payment-option loans have modest incomes and could already be stretched financially."

There are some suggestions that can mitigate such risks. The most reasonable would be to switch to risk-averse options such as 15-year or 30-year standard amortization schemes. Another practical tip suggests switching to an interest-only mortgage option if full payments are currently not feasible. The positive feature about interest-only payments is that these would not result in still-higher principal debt balances to pay off later.

Sandra Block offered some beneficial advice to potential borrowers in a USA Today article. She explains, "Look for lenders that have raised their borrowing limits for conforming loans. Rates on conforming loans, which are loans that lenders can sell to Fannie Mae and Freddie Mac, are a quarter to three-quarters of a percentage point lower than those for jumbo loans."

The most important advice for all is to never stop learning. By researching more information about mortgages, and home-buying process in general, one would be at a better position in getting the most suitable home mortgage refinancing deal, which mitigate the risk of frustration in due time

How can a mortgage calculator help you refinance

A mortgage calculator can help you work out the savings in interest over the remainder of your first mortgage. You can compare savings with different interest rates from different lenders and choose a refinance loan with the least processing and closing costs. It saves you number crunching and you get results instantly. You can then decide on the refinance loan that offers you the best deal.

Options in refinancing are many. You can use a refinance under the rate and term system to repay your first mortgage. Under the scheme you can get up to 2% of the new loan amount as cash back or $2000, whichever is less. You can use a rate and term refinance to repay a second mortgage. You can use a refinance loan to save money on your earlier mortgage, if you are planning to live for more than three years in the same home. You can shift to a 15-year loan with a higher monthly outgo, but work out the benefits of doing so using the mortgage calculator before making any decision.

Illustration

Let us consider that the original interest rate is 6.5% for a 30-year loan of $250,000. Assuming you have 120 months or ten years left of this loan and the interest rate reduces to 6.25%. You can go for a refinance loan of $200,000, of 30 years at 6.25%. Using a mortgage calculator for the remainder of the loan amount of $139,623.21, your monthly payment works out to $1580.17 for the old loan and $1231.43 for the new refinance loan, giving you monthly savings of $348.74. This works out to a saving of $125544.84 if you take the refinance loan. All figures are indicative and may not reflect actual interest rates. For the current interest rates, you can use the mortgage calculator for refinancing the loan which is available at most financial websites.

The disadvantage of not using a mortgage calculator

Taking a refinance loan costs money and involves savings of thousands of dollars over the tenure of the loan. It will be foolish to ignore the potential savings gained by using a mortgage calculator. Hence, consult a reputed mortgage lender and use their mortgage calculator to go for a refinance today.