Property Value
To see what mortgage and refinance rates you could qualify for, enter your current property value. You likely won't have done an appraisal, so make this a best-guess effort. Take a look at some other homes in your area that have recently sold and find ones that are comparable to yours. Once you look at a few of those homes, you should start to get a broad sense of what your home is worth. Put what you think your home is worth in this field.
Loan Balance
Enter your current loan balance. You'll usually be able to find this information if you request a mortgage payoff statement from your lender. This statement will say something like payoff amount of $250,000 good through December 30. This statement means that if you pay that amount of money before December 30, the bank will consider the loan closed. Since a refinance is merely taking out a new mortgage and paying off the old loan with the money, that payoff amount is the exact value you'll want for these calculations!
Cash Out
If you'd like to cash out some of your home's equity, enter the amount you'd like in this text box. When looking at refinance rates on this calculator, you'll likely see that they are much less expensive than other forms of borrowing, such as personal loans or credit cards. When refinancing your loan, you can typically borrow up to 80% of your home's value. Let's suppose you have a $200,000 balance on your loan and a home worth $500,000. Therefore, you can refinance for any amount between $200,000 and $400,000. The bank will give you any amount above $200,000 as cash. Many people use this money to pay for trips, pay off debt, make big purchases, or invest. If you'd like to get some money out as cash, enter it here.
Loan Types
Select the type of loan for which you would like to see the refinance rates. There are three possible loan types from which you can choose.
The first is a conventional loan. This loan type is the most common and the most straightforward. When applying for a conventional refinance mortgage, you can refinance up to 80% of your home's value. The bank has a set of criteria that they'll use to determine if you qualify or not, which typically means a credit score of at least 620 (although 680+ is preferable) and a debt-to-income ratio of no more than 45% when factoring in the refinanced loan.
The second loan type is an FHA loan. With this replacement mortgage, you'll have a loan backed by the Federal Housing Administration. These loans have looser requirements. You'll need a minimum credit score of 580 and a debt-to-income ratio of 43% maximum. You can refinance up to 80% of your home's value. The downside is that you must pay for private mortgage insurance - even with 20% equity - which tends to make this option more expensive.
Finally, the last (and best option, if you qualify) is a VA refinance. This option has significant benefits, allowing refinancing for up to 100% of your home's value (including cash out!), as well as no mortgage insurance costs. The minimum credit score is 580, and, while there is no specific debt-to-income maximum, anything above 41% will encounter additional scrutiny.
Loan Products
Choose the type of loan that you want. Broadly, there are two types of loans, and each one has a drastic impact on your refinance rates.
Fixed loans are the first loan category. They have a fixed interest rate and monthly payment for the duration of the loan. Therefore, if your term is 30 years with a monthly cost of $1,500 per month at 3.5% APR, that payment, term length, and interest rate will never change. The only way you can adjust it is to refinance. These loans typically have 30, 20, 15, or 10-year durations. The shorter the term, the lower the interest rate!
The second loan category is an ARM or adjustable-rate mortgage. With this loan, you will have a fixed rate for a certain length of time (say, five years). After that, your interest rate will adjust based on an index. They'll take that index (say, the one-year Treasury bills) and add a percentage to it. As an example, let's say you have a 5/1 ARM over a 30-year term. The interest rate is 2% for the first five years, and then the one-year T-bill rate plus 2% each year after. Your monthly payment will be constant for the first five years, calculated at a 2% interest rate to pay off the loan in 30 years. After year five, let's suppose the T-bill rate is 4%. Now, your interest rate jumps from 2% to 6% (4% T-bill + 2% markup)! This jump will boost your monthly payment significantly. Then, in year seven, the T-bill rate goes back down to 1%. Now, your monthly payment accounts for a 3% interest rate (1% T-bill + 2% markup).
Due to the consistent monthly payments, usually fixed loans are the better choice for those looking to stay in their homes for the long-term.