Estimated New Monthly Payment & Total Cash Received
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Understanding Cash-Out Refinance
A cash-out refinance is a type of mortgage refinance where you replace your existing mortgage with a new one that has a larger balance. The difference between the new loan amount and your current mortgage balance is paid to you in cash. This allows homeowners to tap into their home's equity for various purposes, such as home improvements, debt consolidation, education expenses, or investments.
How the Calculator Works:
This calculator helps you estimate your new monthly mortgage payment and the actual cash you'll receive after a cash-out refinance. It considers your current home's value, your existing mortgage balance, the amount of cash you wish to take out, and the terms of the new loan (interest rate and term).
Key Calculations:
New Loan Amount:
This is calculated as your Current Mortgage Balance + Desired Cash-Out Amount + Estimated Closing Costs. For simplicity, this calculator estimates closing costs as 2% of the new loan principal.
Estimated Closing Costs:
Refinancing incurs closing costs, which typically range from 2% to 5% of the loan amount. This calculator uses a conservative estimate of 2% for illustrative purposes. These costs are added to your loan principal.
Actual Cash Received:
This is the Desired Cash-Out Amount, before considering closing costs which are rolled into the new loan.
New Monthly Mortgage Payment:
This is calculated using the standard mortgage payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]), where:
P = Principal loan amount (New Loan Amount including estimated closing costs)
n = Total number of payments (Loan Term in Years * 12)
When to Consider a Cash-Out Refinance:
Home Improvements: Fund renovations to increase your home's value or improve your living space.
Debt Consolidation: Pay off high-interest debts (like credit cards or personal loans) with potentially lower mortgage interest rates.
Major Expenses: Cover significant costs such as medical bills, educational tuition, or a down payment on another property.
Investment Opportunities: Utilize funds for investments that may yield a higher return than the mortgage interest rate.
Important Considerations:
While a cash-out refinance can be a powerful financial tool, it's crucial to understand the implications:
Increased Debt: You will owe more on your mortgage.
Longer Repayment Period: Refinancing may reset your loan term, meaning you'll be paying for your home longer.
Closing Costs: Factor in all associated fees (appraisal, title insurance, origination fees, etc.).
Equity Reduction: You will have less equity in your home.
Interest Paid: Over the life of the loan, you will pay more interest due to the larger loan amount and potentially longer term.
It is highly recommended to consult with a mortgage professional to discuss your specific situation and explore all available options before proceeding with a cash-out refinance.
function calculateCashOutRefi() {
var currentValue = parseFloat(document.getElementById("currentHomeValue").value);
var currentBalance = parseFloat(document.getElementById("currentMortgageBalance").value);
var desiredCash = parseFloat(document.getElementById("desiredCashOut").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultMonthlyPayment = "$0.00";
var resultCashReceived = "$0.00";
if (isNaN(currentValue) || currentValue <= 0 ||
isNaN(currentBalance) || currentBalance < 0 ||
isNaN(desiredCash) || desiredCash <= 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm = currentValue) {
alert("Current mortgage balance cannot be greater than or equal to the current home value for a cash-out refinance.");
document.getElementById("monthlyPayment").innerText = resultMonthlyPayment;
document.getElementById("cashReceived").innerText = resultCashReceived;
return;
}
var estimatedClosingCostsRate = 0.02; // Assuming 2% closing costs
var estimatedClosingCosts = (currentBalance + desiredCash) * estimatedClosingCostsRate;
var newLoanPrincipal = currentBalance + desiredCash + estimatedClosingCosts;
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var monthlyPayment = 0;
if (monthlyInterestRate > 0 && numberOfPayments > 0) {
monthlyPayment = newLoanPrincipal * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else if (numberOfPayments > 0) { // Handle 0% interest rate
monthlyPayment = newLoanPrincipal / numberOfPayments;
}
resultMonthlyPayment = "$" + monthlyPayment.toFixed(2);
resultCashReceived = "$" + desiredCash.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 });
document.getElementById("monthlyPayment").innerText = resultMonthlyPayment;
document.getElementById("cashReceived").innerText = resultCashReceived;
}