Mortgage Loan Refinance Calculator Bankrate Amortization

Mortgage Refinance Formula:

\[ \text{Interest (month m)} = \text{Outstanding Balance} \times R \] \[ \text{Principal (month m)} = \text{EMI} - \text{Interest (month m)} \]

Loan Amount:

Interest Rate:

Loan Term:

years

Start Date:

Monthly Payment (EMI):

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1. What is Mortgage Refinancing?

Mortgage refinancing is the process of replacing your existing mortgage with a new loan, typically to secure a lower interest rate, change the loan term, or convert equity to cash. This calculator helps you understand the amortization schedule for a refinanced mortgage.

2. How Does the Calculator Work?

The calculator uses standard amortization formulas:

\[ \text{Interest (month m)} = \text{Outstanding Balance} \times R \] \[ \text{Principal (month m)} = \text{EMI} - \text{Interest (month m)} \]

Where:

\( \text{Outstanding Balance} \) — Remaining principal at start of month
\( R \) — Monthly interest rate (current rate / 12, as a decimal)
\( \text{EMI} \) — Equated Monthly Installment (fixed payment amount)

Explanation: Each payment is divided between interest (based on current balance) and principal (the remainder). Over time, more of each payment goes toward principal.

3. Understanding Amortization

Details: Amortization is the process of spreading loan payments over time. Early payments are mostly interest, while later payments are mostly principal. This schedule shows exactly how each payment is allocated.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, loan term (in years), and start date. The calculator will show your monthly payment and generate an amortization schedule showing how each payment is split between principal and interest.

5. Frequently Asked Questions (FAQ)

Q1: Should I refinance my mortgage?
A: Consider refinancing if you can get a rate at least 0.5-1% lower than your current rate, or if you need to change your loan term. Run the numbers to see if savings outweigh closing costs.

Q2: How does refinancing save money?
A: Lower rates reduce monthly payments and total interest paid. Shorter terms build equity faster (though payments are higher).

Q3: What are "points" on a mortgage?
A: Points are upfront fees (1% of loan amount) paid to lower your interest rate. Each point typically reduces rate by 0.25%.

Q4: How long does refinancing take?
A: Typically 30-45 days from application to closing, similar to getting a new mortgage.

Q5: Are there costs to refinancing?
A: Yes, expect 2-5% of loan amount in closing costs (appraisal, title insurance, etc.). Calculate "break-even point" (when savings exceed costs).