Interest Only Loan Calculator | When Is Mortgage Refinancing A Good Move?

Dear Dr. Don,

My housing loan lender is gift to refinance my loan at a descend rate due to my glorious remuneration history. Here's my stream situation: we have 7 years left on my mortgage. we owe $81,500 at a prearranged fascination rate of 5.5%.

The lender is gift me a loan at 4.13% with no shutting expenses or any responsibility other than interest. we pay my taxes separately. we do not see the advantage, other than obscure my monthly remuneration and saving fascination on the outstanding years. we must be able to compute the fascination extra savings and how ample my remuneration will be lowered to establish if this is a great offer. Can you help me with these calculations?

-James

Dear James,

There are two key things to ponder before receiving value of this offer. First, is the new fascination rate a prearranged rate? Second, is the loan tenure the same as your existing loan?

Extending the loan tenure can enlarge the fascination expense, even if it's at a descend fascination rate.
Bankrate's housing loan remuneration calculator will compute the monthly remuneration and will give an amortization report that shows the complete fascination responsibility is to new loan. You can moreover come in the details for your existing housing loan loan and establish its complete fascination expense.
In addition, you can use Bankrate's refinancing calculator to establish how ample you'll save by refinancing. we ran the numbers, too, and my results are shown below:

You moreover should agree to that the fascination extra savings might be reduction on an after-tax basement if you can entirely implement the housing loan fascination charge on your income taxes. In that case, you can guess your efficient extra savings as the disparity in fascination expense, times a minus your borderline sovereign income taxation rate. If you're in the 25% bracket, then your efficient extra savings after taxation would be $4,390 x (1 - 0.25), or around $3,293.

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