Calculating your potential savings when refinancing your home loan involves comparing your current mortgage with the new mortgage you are considering. Here are the steps to follow:
- Determine your current monthly payment: Look at your current mortgage statement and note the amount you’re currently paying each month. This includes principal, interest, property taxes, and homeowner’s insurance.
- Calculate your current interest rate: Look at your current mortgage statement and find the interest rate you’re currently paying.
- Estimate your new interest rate: Research and compare interest rates from different lenders to estimate your potential new interest rate.
- Determine your new monthly payment: Using the estimated interest rate, calculate your new monthly payment by plugging in the loan amount, interest rate, and loan term into a mortgage calculator.
- Calculate your savings: Subtract your new monthly payment from your current monthly payment to calculate your monthly savings. Multiply that number by the number of months you plan to stay in your home to determine your total potential savings.
It’s important to note that refinancing your home loan comes with additional costs, such as closing costs and fees. Be sure to factor in these costs when calculating your savings to get a more accurate picture of the potential benefits of refinancing.
Also, consider other factors that can impact your savings, such as the length of the new loan term and any changes to your interest rate. By taking the time to calculate your potential savings, you can determine whether refinancing your home loan is the right choice for you.