Mortgage refinancing calculator : how much can I afford?

Even the most complex mortgage refinancing calculator can't give you a definitive answer as to how much you can afford. Online mortgage refinancing calculators work by taking a certain number of variables and running those variables through a formula. You input the variables, which usually include your wages, how much you're currently paying for your mortgage, the value of your home and any savings you may have. However, most online calculators are simple machines doing simple math, so it's dangerous to rely on them alone if you're planning to refinance.

CLICK HERE FOR A CALCULATOR TOOL FROM THE BBC SITE

A mortgage refinancing calculator usually gives you an answer based on your present financial situation. However, these calculations can't tell you anything about other, non-financial considerations, or about what your financial situation is likely to be in the future. All these other factors need to be taken into account when you're thinking about how much you can afford. For example, an online mortgage calculator will probably assume that you'll be earning the same wages for the next ten years. A more sophisticated version may assume a slight annual increase in your wages when working out what you can afford. But what if you take an unpaid career break? There's no way a machine can be expected to guess that you want to start a family or enter full-time education.

Of course, a mortgage refinancing calculator can be a useful tool for giving you an idea of what you can afford. But you should always check the machine's results with your own workings.

Other considerations when using a mortgage refinancing calculator

If you're planning to refinance because you want a better rate of interest, you need to work out how much money another mortgage deal would save you. This is a combination of calculation and straightforward legwork. You need to find out what rates each lender is offering, and for how long they are offering those rates. For example, imagine that Lender A is offering a two per cent rate of interest for two years, followed by a ten per cent rate for eight years. Lender B is offering a five per cent rate of interest straight away, and this figure doesn't change. Both deals require you to stay with the mortgage for at least ten years. In this situation, it would be better in the long run to go with Lender B. Many people would be tempted to go with Lender A because the first couple of years will be so manageable. However, you should think about the long term when refinancing.

You also need to consider administration costs, redemption penalties imposed by your current mortgage lender, taxes and other hidden costs. One significant cost is mortgage insurance - if your new mortgage is for less than 80 per cent of the home's value, you can probably drop your private mortgage insurance, which means substantial savings. A mortgage refinancing calculator can help give you a rough idea of what to do, and it does some of the math for you, but you need to make your own calculations before making a decision.

 

 

 

 

 

© AskFinancially.com 2008

Mortgage Refinancing

Ask About

> Introduction
Re-evaluating your mortgage
> Mortgage refinance
> Refinance mortgage rates
>Refinancing calculator
> Interest only
> Refinance company
Getting a second mortgage
> Refinancing your home
> Home refinancing
> Refinance second mortgage
> Second mortgage
> Bad credit refinance
Other mortgage options
> Commercial
> Mobile home
> Reverse mortgage
> Refinance home equity loan
> Bad credit mortgage
> Insurance