If you have begun to research the mortgage refinance process, you have probably made an important discovery regarding calculators. In order to determine if a refi is the right financial move, you must first run the numbers to determine your savings.

Because let’s remember the all-important rule of thumb: If the money you pay to refinance your mortgage (the closing costs associated with it) exceeds the money you save over the term of the new loan, then it doesn’t make any sense to refinance the loan.

This is where calculators come into the picture. A refinance mortgage calculator can help you run the numbers to see where you’ll come out after the refi. More specifically, it will help you compare your current mortgage payments to your new payments after refinancing the mortgage. You can then compare your savings to what you might expect to pay in closing costs to see if the refinance makes sense.

That’s why I always tell people to start the research process by using a refinance mortgage calculator to run the numbers. The question is, where do you find the best refinance mortgage calculator … or does such a thing even exist?

Here’s my advice to you. I wouldn’t rely on just one refinance calculator. I would bookmark two or three of them and use them all to validate one another. It’s kind of like using a scale to weight something. How do you really know if the scale is accurate? You don’t, unless you compare it against other scales to validate the reading.

You can do the same thing with refinance mortgage calculators — and I highly encourage you to do so. So instead of searching high and low for the best refinance calculator (and wearing yourself out in the process), just find two or three decent calculators and use them all.

If you’d like, you can start with the one we have on our Resources page. Then all you have to do is find a couple more calculators and bookmark them for future reference.

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In most cases, the whole point of refinancing a mortgage loan is to secure a lower interest rate than what you’re currently paying on your home loan. In doing so, you can lower your monthly mortgage payment as well, which can save you a lot of money over the life of the new loan.

But you have to know what the interest rates are doing in order to make smart decisions about refinancing your home loan. And according to a recent article by the San Francisco Chronicle, interest rates are likely to fluctuate some more as a result of recent actions by the government.

To quote the article:

The economic stimulus bill that President Bush signed Wednesday has plunged people who are trying to buy or refinance an expensive home into jumbo limbo. The bill raises the maximum mortgage that can be purchased by guarantors Fannie Mae and Freddie Mac. Today that limit is $417,000 across the continental United States. Anything below that limit is called a conforming loan; anything above it is a jumbo. -Source

What does this mean if you’re planning to refinance your home mortgage loan? Well, for one thing it means the rate quote you get today from lenders might be different from the rate you get a month from now. That’s always the case in a dynamic economy like ours. But it’s even more true given the recent stimulus actions by the government … and the economical impact of those actions.

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If you’re a homeowner, I’m sure you have heard a lot about mortgage refinancing on the news lately. After all, with the mortgage crisis that we are still enduring, a lot of nervous homeowners are rushing to refinance their home loans.

The question is — when should you refinance your mortgage loan, and when should you avoid refinancing? This question is high on the list of many homeowners, so we will shed some light on the subject.

When Refinancing Makes Sense

There are several rules of thumb you can use to determine if refinancing makes sense for you. Two of the most common are listed below. Keep in mind these are just general rules about when to refinance a mortgage loan, so you should not make your decision based on these “rules” alone. Always do thorough research and seek the advice of a financial professional.

With that being said, here’s a basic guide on when to refinance a home loan, from a financial standpoint:

• When interest rates are low – This is the primary reason that homeowners will turn to mortgage refinancing in the first place. When the rates are low, homeowners in certain situations can refinance to a lower interest rate, and thus reduce their overall monthly mortgage payment.
• To switch from an ARM to a fixed rate mortgage — This is another common reason why people refinance their mortgage loans. If you’ve been watching the news lately, you’ve seen a lot about ARM loans that adjust to such a higher rate the homeowner can no longer afford the payments. So many will people refinance an ARM loan before it reaches the adjustment point.

The goal of both of these strategies is the same … to either (A) lower the interest rate on the loan, or (B) prevent the interest rate from rising through a mortgage adjustment. In both cases, the goal is to pay less money each month on the mortgage payment.

When Not to Refinance

At this point, it’s important to point out that mortgage refinancing is not always a good idea. Here’s another rule of thumb. If the money you pay to refinance the loan (closing costs) exceeds the money you save over the term of the new loan (lower interest rates), then it doesn’t make sense to do the refi. After all, nobody wants to pay more than they save in a financial transaction.

The key here is to do the proper research to find out what you’ll pay, as well as what you’ll save after refinancing. Once you figure those numbers out, you’ll have an easier time answering that common question — when to refinance a mortgage loan.

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