Refinance home loan calculator

The best way to use a refinance mortgage calculator is to first work out exactly what you’re looking for in your next home loan, then apply the relevant calculations.

Some examples of what you might be looking for in a new home loan include:

1. Reducing your repayments. A refinance calculator can help you switch and save, by working out the lowest interest rates you may be able to afford, and how much you may save compared to your current mortgage rate.
2. Paying off your loan faster. Whether you’re five or fifteen years into paying off your home loan, refinancing to a lower interest rate may allow you to shorten your loan term. If you keep making the same home loan repayments as you are now, but switch to a lower rate, you may be able to pay off the loan much sooner.
3. Choosing a different loan type. Maybe you are on a variable rate home loan and now want the stability of locking in a fixed rate home loan, so your repayments are no longer subject to market conditions, or vice versa?
4. Getting cash out of your home loan. Perhaps you’re looking to consolidate some debt or renovate your home? Refinancing your home loan can let you enjoy flexible features, such as a redraw facility, or you could refinance and borrow a little more to have some extra cash at your disposal.

Once you know what you want from your new home loan, you can select the correct option from above the calculator.

Next, all you’ll need to do is:

• Enter your loan balance
• Enter your current monthly repayments
• Enter your current interest rate

Then, depending on what refinancing journey you are on, you’ll need to:

• Enter the amount of cash out you want; or
• Enter a number of years to see how much you may save with different homeloans over time by switching.

Your calculations, and potential new home loans will then automatically load in the comparison table.

• Keep in mind that a refinance home loan calculator does not take every aspect of your personal situation into account, such as your credit score or employment status, and is not a substitute for professional financial advice. Consider contacting your mortgage broker for advice specific to your personal circumstances.

The refinance calculator is a tool to help you calculate how much you may save in time and repayments when switching your home loan, as well as how much you seek to gain through new loan features.

Whether your home loan costs you more per month than you’d prefer to pay, or you'd like to be out of debt sooner, or you want to put the equity in your home to use, you may want to calculate whether refinancing your mortgage will help you achieve these goals.

RateCity's refinance calculator can help you quickly and easily compare the costs and benefits of refinancing your mortgage across the home loan market.

A bank’s refinancing home loan calculator may show you potential savings, but will generally only direct you to refinance with that bank. Further, bank calculators don’t always let you adjust the figures in your calculation, like the interest rates and mortgage terms. This may prevent you from being able to see how each factor will impact potential new home loan options.

For example, a home loan package also offering credit cards may sound like a competitive option, but will also typically incur higher costs and fees from the lender. A refinancing calculator can help to show you the more realistic cost of switching.

Before you refinance your mortgage, it’s important to confirm that you’ll be getting a better deal than your current loan. A few small details could make a big difference to the cost and benefits of your home loan.

For example, when some borrowers refinance, they choose a longer home loan term than their current mortgage, so their monthly payments are even cheaper. However, the longer you take to pay back your loan amount, the more interest payments you’ll need to make. Even if your new home loan has a lower interest rate, you could still end up paying more in total interest charges over the life of the loan by switching to a longer home loan term.

To illustrate, if you’re 10 years away from paying off your mortgage, refinancing to a new home loan with a 30-year term could end up costing you more money in total, even if the interest rate is lower. It’s important to compare your options and consider contacting a finance professional before applying to refinance.

There are both advantages and disadvantages to refinancing your home loan that are worth weighing up before you make the switch.

Pros:

• Switch and save. You could potentially save big on your repayments if you switch to a home loan with lower interest rates and/or lower fees.
• Greater flexibility. You may find it easier to manage your loan if you switch to a new mortgage that is more flexible (e.g. adding an offset account, redraw facility, split interest and more).
• Shave years off the loan. By switching to a lower rate loan, but keeping your monthly mortgage payment amounts the same, you may shave years off of your loan through reducing the principal faster, and therefore reducing the interest you may be charged.

Cons:

• Forgetting about fees. If you don’t also factor potential fees and refinancing charges into your refinancing costs (such as new loan upfront fees), you run the risk of losing money you saved in lower interest charges. The potential savings may be exceeded by the fees accrued during the refinancing process.
• Risk of less flexibility. You may find it harder to manage your mortgage if your new home loan is less flexible.
• Paying LMI. You may need to pay lender’s mortgage insurance (LMI) if your home has fallen in value and your LVR has been pushed up above 80 per cent.