Loan refinance is a term that is used for getting another loan for repaying earlier loan. While getting refinance loan, it is very important to know if a person really gains something out of whole deal or not. Though many people think that taking refinance loan at lower interest rate can easily help them in saving some amount each month, sometimes prepayment penalty, low interest rate difference, and hidden charges makes refinance loan dearer than earlier loan. In such circumstances, one tool that can really help a person in getting refinance loan in a beneficial way is refinance loan calculator. There are many online sources that provide refinance loan calculator.
All types of calculators utilize current as well as calculated mortgage payments for estimating monthly savings regarding refinancing of current loan. Basic purpose of refinance loan calculator is to analyze total savings and cost of whole refinance transaction. Most of refinance loan calculators also provide facility of comparing principal balance in past 5 years in both cases, with and without refinancing option. One important feature of refinance loan calculator is that it helps a person in a great way is the calculation of break even period with respect to monthly savings. This is done by utilizing loans costs and loan points . However, time value of money and other factors like income tax deductions are not considered for the purpose of refinance calculation.
There are some pieces of information that are common to all the refinance loan calculators. First is current loan amount. This is the amount that a person wishes to get refinanced. Second is current loan payment. This is the monthly repayment amount that a person is making. Third is the rate at which interest is being applied in the loan account. All three above makes current loan information. As far as refinance information is concerned, a person is required to enter the new loan amount required for refinance and for other financial requirements. Second is the new interest rate, i.e. interest rate attached with refinance loan and third is the term of refinance loan sought. Third information required is about property. It comprises property value, loan points, loan costs and years before sale. Once all the information is punched into the refinance loan calculator, desired results are obtained. Results enable a person in knowing if refinance is really helpful or not. Let us understand this with help of an example . If current loan amount of a person is 97280, current loan payment is 1250 and interest rate is 6.625% and he takes a refinance loan of 100000 at 6.125% for a period of 30 years with property value equal to 130000, 1.0 loan points, 2000 loan costs and 5 years before sale, following information is provided by calculator: Monthly payment of refinance loan is 607.61 and monthly savings are 642.39. All values mentioned above are in US Dollars.
As far as the utility of refinance loan calculator for different types of loans is concerned, a person can use these calculators for car loans, mortgage loans, home loans, personal loans etc . Web sites of almost all the lending institutions that provide refinance loans contain refinance loan calculator. These online calculators are easy to use and provide results in no time. In fact, there are certain web sites that allow a person to get the interest rate of leading lending institutions in the nation for comparing savings achieved by getting refinance loans from different types of financial institutions. This helps a person in getting maximum possible savings through refinance. Let us discuss refinance loan calculator of UCU, a credit union in United States. This calculator helps a person in determining the amount of interest that can be easily saved by him when he refinances his existing loans through loans obtained through it.
Even a person can use this refinance calculator for comparing credit card balances and medical bills when he uses a UCU personal loan for consolidating them. Similarly, a person can use this refinance loan calculator for comparing existing car loan with UCU car refinance loan and savings made through that. Information required for using UCU refinance calculator include current balance information, existing loan interest rate and remaining term of loan. Entry in decimal points can be made like using 4.5 instead of 41/2 years. This calculator can be used for three different purposes. First of all, a member can easily match his exact repayment term so that he is able to repay the existing loan in same time period by obtaining loan from UCU. Secondly, it can be used for paying off the loan amount in a quicker way by paying same monthly installment amount but at low interest rate. Last but not the least, a person can use calculator for making low payments by taking longest period refinance loans. While using UCU refinance calculator, current interest rates are automatically plugged.
However, a person should be aware of certain aspects. First of all, calculators of lending institutions are provided strictly for illustrative purposes. Use of these calculators does not constitute any offer of lending or mentioned savings. All the results provided by calculators are estimates and thus, actual result may vary. If results vary, there is no liability or responsibility of calculator provider to pay for errors. Similarly, there is no representation or guarantee made by the institution that a person will definitely qualify for a particular loan or loan term.
Prepayment penalty is one aspect that must be looked very carefully by a person while getting refinance. This is because there are some lenders that impose heavy prepayment penalties and in such cases, gains made by interest rate difference are not sufficient enough to overcome amount of penalty. Prepayment penalty is applied in percentage terms and if outstanding loan amount is huge, prepayment penalty would also be huge. There are of course some refinance loan calculators that take this factor into consideration also so that exact results can be achieved. Such calculators are obviously better than other ones.