Refinancing a home loan could help you lower the interest rates, thereby reducing your EMIs and overall loan burden. But, ultimately the decision whether you should opt for a home loan transfer is a personal decision. This is where the refinance calculator comes into the picture. The calculator takes your home loan information and helps you figure out whether refinancing is the right option for you.
Here, in this guide, you can find all that you need to know about a home loan refinance calculator. But, before we figure out how to use the calculator, let’s take a quick look at what home loan refinancing is and how it works.
What is home loan refinancing?
Also known as home loan transfer, home loan refinancing is the process of transferring an existing home loan to a new lender, at reduced interest rates and revised terms and conditions. There are many reasons why borrowers opt for a home loan transfer:
To reduce interest rates
To change the tenure of the loan
For better customer service, etc.
Things to Know Before Opting for a Home Loan Refinance
A home loan transfer is a big decision. Just like the tons of research you did while taking a home loan for the first time, you need to consider various factors like interest rates, processing fees, property verification and more. There are several factors like – your current home loan outstanding, the interest offered by the new lender, the current interest rate, closing costs, etc.
How does a refinancing calculator help?
To evaluate whether home loan refinancing works out for you, you can take the help of an online refinance calculator. The refinance calculator is an online tool that determines whether you can see a reduction in home loan burden by transferring it to another lender. You can play around with the various numbers to figure out the best option for you.
The main idea behind home loan refinancing is to determine whether the monthly savings you get from the new loan is higher than the costs of refinancing. In other words, you need to figure out whether the reduced interest rates offered by the new lender will help you recoup the cost of refinancing – closing charges, refinancing charges and other miscellaneous fees you pay to your existing and new lenders.
If the number presents you with significant savings, then the trouble taken for refinancing is worth it. If you don’t enjoy any savings as a result of transferring your home loan to a new lender, then it’s highly recommended that you continue the loan with your current lender.
How to use a home loan refinance calculator?
The home loan refinance calculator is quite easy to use. It's available for free on the websites of several leading banks and other lenders. Using the calculator, you can determine whether transferring a home loan offers you savings in EMIs while lowering the cash outflows for your current loan.
To use the calculator, you have to input specific details regarding your loan like:
The current outstanding for your existing loan – This is the balance you owe to your current lender. It includes both the principal and interest component of your home loan.
Remaining tenure of your home loan – This is the balance of the loan term.
Current interest rate – This is the interest rate you are being charged for your existing home loan.
Once you enter these details, the calculator provides you with a fair comparison between your current loan cash outflow and the revised outflow for the new loan. This gives you a clear understanding of the total savings you enjoy when you opt for a home loan refinance. If the savings are substantial, you can choose to transfer the home loan to the new lender.
Note that the calculator returns information based on the inputs you provide it regarding your current home loan. You must provide accurate information to receive accurate results. While using the refinance calculator is a good idea, remember that it should be just one of the many factors to evaluate your decision. Also, the information used by your new lender may be different from the results shown by the calculator.
Should you refinance your home loan or not?
Ultimately, the decision of whether you should transfer your home loan to a new lender depends on your specific situation. Using a home loan refinance calculator will help you decide whether it's worth the hassle. Make use of an online refinance calculator to make the right decision.
Happy number crunching!