When you refinance, you pay off the existing mortgage loan and replace it with a new one, known as a consolidation loan. The new mortgage is given to you at a much lower rate than you would have paid on the original mortgage.

However, the amount you pay on the new mortgage is lower than the amount you paid on the original mortgage. The reason this happens is because the refinancing loan is backed by the government. The government backs most of the loans in your mortgage, but they give you some cash to buy your new home.

When you refinance mortgage, the lender doesn’t put any of that cash back in the mortgage. That cash is put into your new mortgage and you pay it back as interest. In other words, the refinance isn’t like a new mortgage loan, it’s like a new loan, and the interest you pay is what the lender gets. If you refinance into a larger mortgage, such as a fixed or adjustable, the interest rate you pay on that loan is what you’ll pay to the bank on that loan.

Refinance for a lower rate than your current mortgage!

However, if you buy a home with a fixed or adjustable mortgage (or refinance into one of those loans), you can choose to pay the amount of interest you will be paying on that mortgage as a higher rate than your mortgage.

To calculate your lower interest rate, divide your total monthly mortgage payment by 20 (the number of years your current loan is term-end) and add 25% to that to get your lower rate. A good rule of thumb to use when considering what your interest rate should be is to subtract the interest rate on your existing mortgage payment from what you’ll pay on the new mortgage. For instance, if you pay $750 a month in mortgage payments, that’s $1400 that you’ll pay on the new mortgage. Divide that by 20 (the number of years your new mortgage is term-end) and you’ll get a lower interest rate of 8.75%. It’s that easy!

How can you save money on your new mortgage?

Your best option may be to start with the down payment on the new mortgage. In addition to the value of a down payment, lower down payments typically result in a lower monthly payment on your new loan.

If you can, make the down payment on the new mortgage before taking out your second mortgage. That way, you’re eligible to have your down payment help offset the interest paid on your second mortgage.

Mortgage Calculator Your Credit Score: Your total credit score is a combination of all three parts of your credit report your FICO score, your score with VantageScore, and your score with Equifax.

What the Math Says About Your Risk Level: Your total credit score is a combination of all three parts of your credit report your FICO score, your score with VantageScore, and your score with Equifax.

New Mortgage Term: The length of your mortgage term, usually a number of years or years and months. New Home: Your new home is the one you’ve just bought or you’ve just sold. Your new home is the one that you’ve just moved into. The new home in this case is the one you’re replacing. The new home is the home that’s right for you. Home Purchases and Sales: There are many types of home purchase, such as a mortgage, credit card, or home equity loan. Home Sales