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Refinancing your home loan is a potentially powerful way to manage your finances more effectively; however, it’s important to fully understand both the potential benefits and the associated costs before making any decisions. Whether you’re an Illinois resident exploring your options, or a homeowner located in another state, utilizing a mortgage refinance calculator can be helpful. Let’s take a look at how a refinance calculator works and how to use it to your best advantage.
Key Points
• Using an Illinois mortgage refinance calculator can help homeowners estimate potential costs and savings linked to a new loan.
• The break-even point is an important number that helps determine if the savings from refinancing will outweigh the initial expenses within a reasonable timeframe.
• Refinancing to a lower interest rate, even by a small margin, can significantly reduce monthly payments and total interest paid.
• Choosing a shorter loan term through refinancing can lead to higher monthly payments but lower total interest costs.
• Purchasing mortgage points can lower your interest rate and monthly payments, but the upfront cost and break-even point must be carefully considered.
Illinois Mortgage Refinance Calculator
Calculator Definitions
• Remaining loan balance: The remaining loan balance is the principal amount still outstanding on your current home loan. Accurate input ensures a reliable estimate of monthly payments with a new loan.
• Current/New interest rate: Interest rate is the percentage of the loan amount charged by the lender. Lowering your interest rate can reduce monthly payments and total interest paid over the loan’s life.
• Remaining/New loan term: The loan term is the duration over which you will repay your mortgage. In this case, you’ll need to input both the number of years remaining on your existing loan and the number of years you would like for your new loan term.
• Points: Mortgage points are upfront fees paid to the lender to reduce your interest rate. Each point costs 1% of the loan amount and reduces your rate by 0.25%.
• Other costs and fees: Refinancing involves various costs and fees, such as origination fees, appraisal fees, and attorney fees. These can range from 2% to 5% of the new loan amount.
• Monthly payment: Your monthly payment includes the principal and interest on your mortgage. The refi calculator helps you compare your current payment to your estimated new payment.
• Total interest: Total interest is the overall cost of the loan, excluding the principal amount. It can accumulate significantly over the life of the mortgage.
How to Use the Illinois Mortgage Refinance Calculator
You’ll need to input a few details into the Illinois mortgage refinance calculator to determine your estimated costs on a new loan.
Step 1: Enter Your Remaining Loan Balance
Find your current principal balance on your latest mortgage statement.
Step 2: Add Your Current Interest Rate
Your current loan’s interest rate should also be on your latest statement, if you don’t recall it.
Step 3: Estimate Your New Interest Rate
Estimate what your new interest rate would be by comparing offers from different lenders or checking current mortgage rates. The type of mortgage loan you choose will impact the rate you’re offered. A lower rate can reduce your monthly payments and total interest paid.
Step 4: Select Your Remaining Loan Term
Type in the number of years you have left on your existing mortgage.
Step 5: Choose a New Loan Term
Input the number of years you would like to have to repay your new loan.
Step 6: Enter Any Points You Intend to Purchase
Purchasing points will lower your interest rate by .25%, but cost 1% of the loan amount upfront.
Step 7: Estimate Your Other Costs and Fees
Use your best estimate or check with your lender for a full list of fees.
Step 8: Calculate Your Break-Even Point
To determine your break-even point, the calculator divides the total costs of points and fees by the amount you stand to save on your monthly payment. This is the number of months you would need to stay in
Benefits of Using a Mortgage Refinance Payment Calculator
Housing costs can be significant, but a home refi calculator can help assess if refinancing could lower your monthly payment, saving you money. The Illinois mortgage refinance calculator compares your current and potential new mortgage, showing monthly payments and total interest. If you’re wondering how soon you can refinance a mortgage, a refinance calculator can help you determine if you’re ready.
By inputting different rates and terms for the new mortgage, you can evaluate the financial impact of a refi. A lower payment frees up cash, while reduced interest saves money over the loan’s life. Even small interest rate reductions can yield considerable savings. Refinancing from a 30-year to a 15-year loan helps you build equity faster and cuts interest.
What Is the Break-Even Point in Refinancing?
One of the most important things the mortgage refinance calculator can help you determine is the break-even point: the time it takes for the savings from your new mortgage to cover the closing costs. To find your break-even point, the calculator subtracts your estimated monthly payment after a refinance from your current mortgage payment. Then it divides the total closing costs by whatever amount you are saving each month. (If you aren’t seeing any savings with a refi, that’s one sign it might not make sense to swap out your loan.)
For example, if your closing costs are $4,000 and you save $100 on your monthly payment, it would take 40 months to break even. If you plan to sell your home before reaching this point, refinancing might not be worth it.
Current mortgage rates by state.
Compare current home interest rates by state and find a mortgage rate that suits your financial goals.
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Typical Closing Costs for a Refinance in Illinois
Mortgage refinancing isn’t free. Mortgage refinancing costs in Illinois can come to 2% to 5% of the new loan amount in closing costs, and understanding the costs is a key part of learning how to refinance a mortgage. Typical fixed closing costs include loan application fees (up to $500), credit report fees ($25-$75), home appraisal fees ($600-$2,000), recording fees ($25-$250), and attorney fees ($500-$1,000+). Common percentage-based closing costs include loan origination fees (0.5%-1% of the purchase price), title search and insurance (0.5%-1% of the purchase price), and mortgage points.
While “no-closing-cost refinance” promotions may be appealing, they could be misleading, since many lenders will increase your interest rate to cover the cost of closing fees. So they’re not necessarily a good deal.
When you’re thinking about a refi, the chief motivator is likely the idea of reducing your monthly payment. Here are a few things you can do at various points in the mortgage process to help you pay less.
• Build up your credit score before applying for a home loan or refinance. It will help you secure better interest rates.
• Extend the term of your loan in the refi to lower monthly payments. You might pay more interest over the long haul, but if short-term cost reduction is your goal, this could be worth it.
• Appeal your property tax assessment. A lower assessment could reduce your monthly mortgage payment if you pay taxes as part of your loan payment.
• Shop for a lower homeowners insurance rate to decrease the cost of insurance, which is often rolled into the monthly payment.
The Takeaway
Refinancing your mortgage can help you save money, but it requires careful consideration and planning. An Illinois mortgage refinance calculator can help you estimate your new monthly payments, see if they’ll save you money, and assist you in determining whether a refinance is worthwhile based on the new loan’s break-even point. Remember to weigh the immediate benefits against the long-term costs, and consider the purpose of the refinance to ensure it’s the right move for you. Getting loan rate estimates from multiple lenders can help you find the refi that’s the right fit.
SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.
A mortgage refinance could be a game changer for your finances.
How much does it cost to refinance your mortgage in Illinois?
Refinancing your mortgage in Illinois involves closing costs, which generally fall between 2% and 5% of the total new loan amount. These costs can encompass a range of fees, including loan application fees, credit report fees, home appraisal fees, title search fees, and insurance.
Do you have to put 20% down to refinance?
When refinancing your mortgage, you don’t need to put 20% down. However, having at least 20% equity in your home can help you avoid paying for private mortgage insurance (PMI), which can add to your monthly expenses.
At what point is it not worth it to refinance?
Refinancing might not be worth it if your break-even point is longer than the time you plan to stay in your home. For example, if your closing costs amount to $6,000 and you anticipate saving $200 per month, the break-even point would be 30 months. If you plan to move before this time elapses, the savings might not justify the costs.
Which bank is best for refinancing?
The best lender for a refinance isn’t necessarily the one who provided your current loan. Look around in the marketplace. Compare interest rates, loan terms, and customer service reputation from multiple lenders to find the best deal. Use an Illinois mortgage refinance calculator to estimate potential savings and costs associated with offers from different lenders.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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