How to Calculate Refinance Mortgage Rates

Lower mortgage payments with a refinance.

Refinancing a mortgage allows homeowners to shorten a loan term or secure a lower interest rate. A lower interest rate will decrease monthly payments and reduce the total cost of financing. Shopping for the right interest rate and loan term is important when refinancing a home. Once you have this information, you can determine the monthly payments associated with the mortgage interest rate.

Instructions

1. Look for the amount owed on the mortgage. This can be found on the first page of the mortgage statement. You can also contact the lender to find out the amount owed.

2. Find the right mortgage term. When refinancing, you can choose a variety of terms, from 15 to 45 years. You will pay higher financing costs with a longer term. Choose the shortest loan term that you can afford. Monthly payments will be higher, but securing a lower interest rate will help offset higher payments.

3. Shop for the best interest rate. Online rate shopping tools, such as Bankrate.com and Yahoo Real Estate, will assist in finding the lowest mortgage refinance interest rates. You can sort results by credit to further refine interest rates.

4. Learn your credit score. Financial institutions use risk-based lending. The better your credit score, the lower interest rate you can secure. A credit score can be obtained at Annual Credit Report (see Resources). Having your credit score will assist in finding the proper interest rate for refinance calculations.

5. Calculate refinance payments. Bankrate.com offers a refinance calculator tool. Enter the total mortgage amount, interest rate and term to calculate the total payment. After entering this information, the calculator will provide a monthly payment.

Tips & Warnings

• Talk with your existing lender about refinancing first. It's expensive to lose business. Some lenders are willing to offer reduce closing costs and streamlined refinances to retain customers.

• Don't forget about closing costs. These costs can add up to thousands of dollars, depending on the refinance amount. According to CNN Money, these costs are negotiable. Fees handled in-house, like application fees and processing costs, are usually negotiable. Ask the lender to reduce or waive these fees to drive down total closing costs.

References

• CNN Money: Refinancing for Less
• Bank Rate: Mortgage Calculator

Resources

• Yahoo Real Estate: Mortgage Calculator
• Annual Credit Report: Credit Report and Score
• Bank Rate: Rate Comparison