Mortgage refinances continue to be an extremely popular financial option for many Canadians. In 2020 there was unprecedented interest in mortgage refinancing and the year before, almost 9% of homeowners took equity out of their home, with an average amount of $72,000.
A mortgage refinance can be a useful financial tool, allowing homeowners to cash in some of the equity in their home and/or secure a considerably lower mortgage interest rate. Refinance mortgage calculators in Canada are really helpful when planning for this process. There are costs involved when refinancing a mortgage, so when you need to know if it’s worth it to refinance, a mortgage calculator can help, as well as being able to help you plan the best time to refinance your mortgage.
When would you use a home refinance calculator?
It makes sense to look at a loan refinance calculator as soon as you start considering refinancing your mortgage. It also pays to compare refinance mortgage rates first, so the results from your house refinance calculator are accurate (it’s also essential to compare refinance rates so you get the very best rate available).
If you don’t compare mortgage refinance rates (and ideally secure a good rate from a new lender), it’s impossible to be 100% certain that taking out a refinance is a good idea, no matter how thorough the mortgage refinance calculator might be.
There are two key reasons why a homeowner would consider refinancing their mortgage:
To secure better refinance mortgage rates: if refinance mortgage rates have gone down considerably since you signed your current mortgage contract, a refinance mortgage payment calculator is really helpful to work out if it is financially worthwhile to go through the mortgage refinance process. There are also various costs involved when refinancing, which a mortgage refinance calculator can work out for you.
To cash in home equity: many Canadians refinance their home to release some of the equity they have in their home. This equity can save you a lot of money when used to pay off high interest debt. Many borrowers also use the money to pay for home renovations. To tell if it’s worth it to refinance, a mortgage calculator can work out potential savings and costs. Refinance mortgage calculators in Canada have become an important financial tool to help homeowners make the right decision.
When can you refinance a mortgage?
It’s important, when considering when to refinance a mortgage, to understand that paying off a mortgage early can bring high penalties (and a mortgage refinance calculator can work them out for you). You can switch lenders without paying a penalty if you do so when your current mortgage is up for renewal. If you compare refinance rates and find a lender with a better offer, you can switch to them quite easily.
When can you refinance a mortgage before the old mortgage term is up? Effectively, you can refinance a mortgage at any point in your current mortgage’s term, but the earlier you do it, the higher the penalty is likely to be. Wondering how to refinance a mortgage for a better interest rate? A mortgage broker can help you get the best rate for your unique situation. Wondering how to refinance a mortgage to cash in some equity? Again, a mortgage broker can help you find the best refinance mortgage and walk you through all the necessary steps.
How to use a refinance mortgage calculator in Canada
There are a few basic pieces of information you will need to have on hand before using a refinance calculator, so before you start, find your most recent mortgage statement. If you’re asking yourself, “How do I calculate my refinance payment?”, “What will my mortgage penalty be?” and “Is it worth it to refinance?” a mortgage calculator can answer all of those questions.
Most refinance mortgage calculators in Canada will ask for the following information:
Current mortgage information:
- Your home’s current value
- Your mortgage balance
- Type of mortgage (fixed rate or variable rate)
- Time left on the mortgage term
- Current mortgage payment
- Current mortgage interest rate
- Your mortgage lender (bank, credit union, etc.)
New mortgage information:
- Mortgage type
- Mortgage term (for example, one, three, or five years)
- Payment frequency (monthly or bi-weekly)
- Amortization (the time it will take to pay off the mortgage in full)
- New interest rate
A refinance mortgage payment calculator will provide you with a lot of really helpful information. Firstly, most loan refinance calculators will work out the refinance penalty amount. This will be based on:
- The length of mortgage term left
- Mortgage amount outstanding
- Mortgage interest rate
- Your lender
Knowing the penalty you will be forced to pay if you switch mortgage lenders early will be key in calculating if it is a viable option to refinance.
How a mortgage prepayment penalty works
There are two types of mortgage, and the penalties for each are calculated very differently, but most house refinance calculators can work them both out for you:
Variable rate mortgages: you may not need a home refinance calculator to do the math on this as it is fairly simple. You will usually be charged three months’ worth of interest of your outstanding mortgage balance, at your contracted mortgage rate.
Let’s say you owe $500,000 on your mortgage and your annual variable interest rate is 2.5%. Here’s how to work it out yourself, without a loan refinance calculator:
500,000 x 2.5% 12 months x 3 months = $3,125
Fixed rate mortgages: these are calculated using a complicated method called the interest rate differential. If you have a fixed rate mortgage and want to work out if it’s worth it to refinance, a mortgage calculator is essential. There are lots of variables when calculating a fixed rate mortgage penalty, including:
- Your contract mortgage rate
- Your lender’s current mortgage rate (and which comparison rate it uses)
- The amount of time left on your term
A cash-out refinance calculator can work out how much your penalty will be, for your particular lender (many lenders calculate the penalty differently). Fixed rate mortgage penalties can be well over $10,000, so a home refinance calculator can be really valuable when making this decision.
What a loan refinance calculator can tell you
Can it calculate my refinance payment? It certainly can, plus a whole lot more. Once you’ve put all the required info into your chosen cash out refinance calculator, it will tell you the difference in payments between your old mortgage and your new one:
- Total interest paid for the remainder of the term
- The amount of interest you’ll save over the term
- Taking into account the cost of the penalty
The final figure that the refinance mortgage payment calculator will give you will be the total amount in savings you will get if you decide to go ahead with the refinance. Of course, if there is little difference between your new and old mortgage rate, and/or your prepayment penalty is huge, the cash out refinance calculator may find that you would make a loss on the deal.
How a home refinance calculator can help you to decide whether to refinance
There is such a lot of great data that a house refinance calculator can provide that can help you make the right decision:
- How much you can save in mortgage interest payments
- How much you can save by paying off high interest debts
- Calculate refinance payments and work out how much money that would free up
Refinancing your home can be a very useful financial strategy and a refinance mortgage payment calculator can help you to be sure that you’re making the right decision.
How a CHIP Reverse Mortgage could be your best mortgage refinance solution
Cash out refinance calculators are powerful tools for helping you to decide whether or not to cash in the equity in your home. But sometimes, house refinance calculators can deliver results that you don’t like.
For example, what if, after you calculate your refinance payments, you discover that the new, larger mortgage payments mean you have little money left over every month?
If you are a homeowner aged 55-plus, there is an excellent alternative to a conventional mortgage refinance: a CHIP Reverse Mortgage. If you have sufficient equity in your home, you can use it to pay off your old mortgage and cash in some extra money from your home’s equity.
And because you don’t have to pay back what you owe until you sell your home or move out, it will help free up much more of your monthly income. Call us today at 1-866-522-2447 to find out how much you could borrow with a better mortgage refinance solution.