1. What is Cash Out Refinance?

A cash-out refinance replaces your existing mortgage with a new, larger loan, allowing you to take the difference between the two loans in cash. This can be used for home improvements, debt consolidation, or other financial needs.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (loan term in months)

Explanation: This formula calculates the fixed monthly payment required to fully amortize the loan over its term.

3. Importance of Mortgage Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitment and compare different loan options before refinancing.

4. Using the Calculator

Tips: Enter the new loan amount (principal), monthly interest rate (annual rate divided by 12), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between rate and APR?
A: The rate is the interest rate, while APR includes fees and other loan costs to show the true annual cost of borrowing.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.

Q3: Should I include taxes and insurance?
A: This calculator shows principal and interest only. Your actual payment may include escrow for taxes and insurance.

Q4: What are closing costs for refinancing?
A: Typically 2-5% of loan amount, including appraisal, title insurance, and origination fees.

Q5: When does refinancing make sense?
A: When you can get a lower rate, need cash, or want to change loan terms - but consider break-even point after fees.