As you may have seen from just about every personal finance blog out there – not to mention all the mortgage rate websites that track the best mortgage rates – now is a a great time to refinance as mortgage rates are at record lows. I did a quick news search, and Reuters just posted an article, US Mortgage Rates Fall to New Record Lows dated October 14, 2010.
Now this would be incredibly amazing news (pardon my hyperbole) – if we haven’t been hearing this same headline for the past 8 months…well really on and off for the last couple of years given where interest rates have been, and given that the Federal Reserve has been holding the federal funds rate (the rate that banks charge each other for short term loans) near 0% (it’s been between 0% and .25% since the end of 2008).
So for some time now, mortgage rates have kept falling and falling. You can see in the table below from HSH.com that mortgage rates have gone down steadily since the beginning of the year. So this is one of those times where it wasn’t necessarily good if you were on top of your game, listened to all the news and did what you were supposed to… and refinanced right away. Refinancing is pricey, so it’s not something you want to do every time rates drop a smidge.
This is one of those times where those who were lazy and haven’t done anything yet, haven’t necessarily missed the boat. Great mortgage refinance rates are still out there to be had.
I’m hoping to take advantage of this myself. I wasn’t lazy, but given all the changes in the mortgage & lending climate, although I had paid down a good size chunk of my mortgage, the value of the property plummeted, and my loan-to-value was screwed… Whereas in 2006 it was something like 80%, given plummeting housing prices, it quickly shot higher than that, killing any chance of refinancing at what the financial media kept screaming at me were the “Lowest mortgage rates in history!!”
But now I’m getting close to a more magical / respectable Loan to Value, and am reconsidering applying since based on others’ recent experiences it’s likely that I’ll be approved. But like any other person who wants to consider themselves somewhat savvy, I wanted to run the numbers myself. So I went down the path of trying to compare refinance calculators and quickly found out that not all of these online budget tools are created equal.
The Best Free Online Mortgage Refinance Calculators
So here is my review of the 10 mortgage calculators I tried out (the top 10 which showed up in Google for “refinance calculator“).
Google Position 1: The Bankrate Mortgage Refinance Calculator. I think BankRate is resting a little bit (at least retaining the top spot on the Google Search Engine results) on it’s reputation and the strength of the site’s brand. Their refinance calculator (below) seems to be the most basic form of the refinance calculator.
The BankRate refinance calculator doesn’t make it clear how you should take into consideration points, or let you take cash out, while most other calculators do. Folks who are on the savvier side could probably figure out how to incorporate this into using the calculator with the existing fields, but if we were able to incorporate everything ourselves then we wouldn’t need the use of calculators anyhow, right? Most other refinance calculators in the top 10 have a similar set of basic questions, but many others have some nice bells and whistles as well.
Google Positions 2 & 3: The Calculators4Mortgages Refinance Calculator. You’ve gotta love a site that is pretty single-mindedly devoted to one topic, right? Calculators4Mortgages, is just that with about 11 different mortgage calculators, and some content and tips. Their mortgage refinance calculator seems more robust than BankRate’s, such as the ability to deal with closing costs by a) rolling into loan, b) paying in cash or c) having the lender pay via Yield Spread Points.
I also like the display on the second page of the calculator since it breaks out a comparison of the existing loan vs. the new refi loan and calculates a difference between the two along a number of factors. Example here:
Google Position 4: Mortgage101 Refinance Calculator. The Mortgage 101 refinance calculator is another pretty basic mortgage calculator that clearly gives you the time required for breakeven, and lets you break out points in your refinance costs. What it doesn’t tell you is how much you would save with a refinance if you held the property for the full term of the loan (which the Calculators4Mortgages refinance calculator did).
Google Position 5: LendingTree’s Refinance Calculator This should really be Lending Tree’s refinance calculators since there are actually links to 6 different calculators including:
- Refinance Mortgage Comparison Calculator
- Refinance Payment Calculator
- Refinance Points Calculator
- Refinance Calculator
- Refinance Home Equity Calculator
- Cash-Out Refinance vs. Home Equity Loan Calculator
This seems pretty impressive, until you start drilling down and using the calculators. One really bothersome difference with many of LendingTree’s calculators is that the entry fields for mortgage terms in years is done as a drop down – with the only selection options being 2, 3, 5, 7, 10, 15, 30, 25, 30, 40 or 50 years. So if your existing loan term doesn’t exactly match one of these, it might be difficult to get to the right numbers. Other calculators allow you to enter years as #’s (and some with decimals so you can estimate 6 months at .5 years) to get to your numbers. Annoying.
The “Refinance Calculator” (#4) is the one most similar to the others. It has some minor differences. The first is it allows you to enter the prepayment penalty on the initial loan as a percentage (vs. entering the penalty as a dollar amount component of the closing costs as the others do). The Refinance Mortgage Comparison Calculator seems somewhat useful in that it allows you to compare a fixed rate mortgage with an adjustable rate mortgage (ARM). The remaining calculators tend to be variants of existing calculators. Their Refinance Payment Calculator is the same as their standard mortgage payment calculator.
Google Position 6: The National Bureau of Economic Research Refinance Calculator. This calculator looks very official and the title at the top of the page cracks me up: Supplementary Materials for Optimal Mortgage Refinancing: A Closed-Form Solution. Wha?
This mortgage calculator is different than the other calculators in that rather than collect information on current and “new” loan terms, it asks you information about your current loan and how long you expect to remain in your house, along with other estimated costs like closing costs and points. Then it spits out an “Optimal Refinance Rate” – and tells you something like “Refinance when the new mortgage rate is below 4.5%”. Great. I like this – it’s actionable, and I can use this info as a guide.
A couple of drawbacks include your not knowing how much to put in as closing costs since you’re not comparing against an actual refinance offer, rather a hypothetical refinance offer (so you don’t really know the exact closing cost amount). Also unlike the other calculators, it doesn’t tell you exactly how much you would be saving. On the plus side, there are some advanced parameters that allow you to tweak a) rate at which you discount future costs, b) average inflation rate over life of new mortgage and c) annualized standard deviation of mortgage interest rate – which might be fun if you were really geeky. One final plus is that there isn’t an ad on the page which adds to its academic cred.
Google Position 7: MortgageCalculator.org’s Refinance Calculator. This mortgage calculator provides essentially the same info BankRate’s & Mortgage101′s calculators, except it allows you to enter in a federal & state tax rate which then calculates tax savings and tax losses from refinancing, which I see as a strong benefit. I also like that it translates the output from a grid into “plain English” so you know how to interpret the results. Easy printing, PDF’ing and emailing of results.
Google Position 8: CNNMoney.com’s Does It Pay to Refinance Calculator. CNN’s mortgage calculator is similar to all the other mortgage calculators – it has all the basic factors the BankRate calculator has, but also has the ability to break out points from other costs, and gives you the ability to compare 3 different refinance offers simultaneously against the original loan. This is great since it allows a side-by-side comparison of potential competing loan offers, so if you have several options you don’t have to run all the numbers and record them to compare. Nice.
Google Position 9: National Association of Realtors Mortgage Refinance Calculator. For being the mortgage refinance calculator of the National Association of Realtors, I was disappointed. The calculator – which is actually supplied by “www.ezloanapply.com” (which just sounds a little spammy, doesn’t it) whose website didn’t resolve, was fine and as basic as the BankRate calculator – does the job but isn’t anything special.
Google Position 10: Refinance Calculator from HSH.com & US News. This refinance calculator is similar to that of other calculators, with a couple of differences. First it asks you to remember the month in which your original mortgage was originated, and then based on that and some other information you enter (original amount, term, interest rate), it calculates what your original loan balance remaining is. Which is great, except what if your original mortgage wasn’t a fixed-term mortgage and you had an adjustable rate mortgage then your balance might not match. Fine, except you can’t change the mortgage amount if what you currently owe as determined by your mortgage statement doesn’t match what their calculator tells you.
So this calculator became a fail for me. But if you can get as far enough that your currently owed amount matches what they tell you the amount is, then the rest works similar to the other refinance calculators.
Bonus Refinance Calculator – When I was researching calculators, I also saw that HSH just this month released a new refinance calculator which isn’t ranking in Google’s top 10. It’s called the Tri-Refi Calculator and it allows you to compare a Traditional Refinance (costs paid out-of-pocket), a Low Cash Out Refinance (costs added to the loan amount), and a No Cash Out Refinance (costs built into the interest rate) so you can compare which of the three different scenarios are right for you. So once you are ready to refinance this calculator will tell you the best strategy for handling your refinance closing costs.
So in summary, my favorites are the Calculators4Mortgages calculator which seems nice and tidy, and displays the results in a concise way with some nice comparisons, the MortgageCalculator.org calculator since it is very user friendly and factors in the tax savings / tax loss impact (which none of the other top 10 sites did) and the CNNMoney refinance calculator which allows you to compare multiple refinance offers at once. The National Bureau of Economic Research Refinance Calculator is also interesting and a good guide for determining when to refinance, but I’d still use one of the others when you actually have a refinance offer to compare actual refinance loan terms against your current mortgage.
Ok, whew. How about you? Do you have a different opinion or have you found a better refinance calculator out there – one that’s not on this list?