If you are thinking of refinancing, use a mortgage calculator first.

With interest rates temptingly low, many homeowners are strongly considering a refinance or remortgage of their homes. There are many reasons for doing this. Some want to tap into the equity they have built up in their property for home improvements, credit card repayments or for one of many unplanned, expensive emergencies. In a market of falling home prices, equity is less and less often a factor. Rather, many people are refinancing simply to avail of a better mortgage deal. Five or ten years ago your mortgage might have felt like a good deal but who could have foreseen such significant cuts in interest rates? Interest rates are not the ‘be all and end all’ of a decision to remortgage, however, as a good mortgage calculator will quickly demonstrate. Begin by considering the issue of lender’s fees. Ignore those ‘no closing costs’ claims and understand that refinancing will not be free. It is so easy to ignore these fees when they are rolled into your new mortgage.

If you examine the fees by themselves, rather than as a tiny fraction of the loan you will realise that they are not tiny at all. Furthermore, the costs of refinancing will incur interest if rolled into the new mortgage. Go Direct offers an excellent free mortgage calculator at www.godirect.co.uk/mortgage-repayment-calculator.php. When you allow it to crunch the numbers for you, it will give you back a list of available lenders offering the package you want and breaking down not only the monthly repayment amount but, additionally, the lender’s fees. The first time you use it, you’ll be amazed at the difference in the charges levied by these mortgage companies and it will very likely influence your decision about which one to choose. In terms of refinancing, a central issue is whether you plan to choose a fixed or adjustable rate plan. A mortgage payment calculator lets you compare the resulting payments and consider the benefits in real terms.

Don’t forget to factor in your own estimation of how long you will be staying in your current home. This factor alone may change your mind about refinancing in the first place. When you are inputting your information into the mortgage rate calculator, try to reduce the term of the new loan by the amount of years you have already paid off on your old loan. If you take on a new 30 year loan, you may negate the original benefit of refinancing because of interest payments. So, for example, if you have paid five years on your old thirty year loan, explore a remortgage with a twenty-five year term. Finally, consider whether there are any pre-payment penalties associated with your new loan. If a mortgage calculator shows you that you will make significant savings, and you want to put some of that extra cash into paying your loan down faster, then you need to be sure that you will not be charged an extra year or two to do this. Bear in mind that you will have to live with this decision for a long time.