Mortgage Refinance Breakeven

How long will it take to breakeven on a mortgage refinance? That depends on a multitude of factors. These factors include your current interest rate, the new potential rate, closing costs and how long you plan to stay in your home. Use this calculator to sort through the confusion, and determine if refinancing your mortgage is a sound financial decision. Click the "View Report" button for a detailed look at your records.

Mortgage Refinance Breakeven

Breakeven Measures

The table below lists four different breakeven measurements. The computations become more conservative as you move down the list. Most people feel comfortable using methods 2 and 3. If you are planning on staying in your home longer than these measures, refinancing is a very good option.

Measure Months Definition 1. Monthly payment savings: BREAK_EVEN_PAYMENTS The number of months it will take for your monthly payment reduction to be greater then your closing costs. 2. PMI & interest savings: BREAK_EVEN_INTEREST The number of months it will take for your interest and PMI savings to exceed your closing costs. 3. Total savings after tax: BREAK_EVEN_TAX_INTEREST The number of months it will take for the after-tax interest and PMI savings to exceed your closing costs. Your income tax rate was entered as INCOME_TAX_RATE. 4. Total savings vs. prepayment: BREAK_EVEN_PREPAY This is the most conservative breakeven measure. It is the number of months it will take for the after-tax interest and PMI savings to exceed both the closing costs and any interest savings from prepaying your mortgage. The prepayment amount used in this calculation is the amount that you would have to spend on closing costs.

Refinancing Summary

Refinancing will change your monthly payment for principal, interest and PMI from CURRENT_PAYMENT to NEW_PAYMENT. Your new loan will be NEW_LOAN_BALANCE at NEW_RATE for NEW_LENGTH years. Closing costs are estimated at TOTAL_CLOSING_COSTS. To avoid PMI payments on your new loan NEW_LOAN_20_EQUITY in equity is required. This equals 20% of your home's current appraisal price.

Original Loan New Loan Mortgage amount ORIGINIAL_LOAN_AMT Mortgage amount NEW_LOAN_BALANCE Appraised value OLD_LOAN_APPRAISED_VALUE Appraised value NEW_LOAN_APPRAISED_VALUE Interest rate CURRENT_RATE Interest rate NEW_RATE Term in years CURRENT_LENGTH Term in years NEW_LENGTH Years remaining CURRENT_YEARS_REMAINING Years remaining NEW_LENGTH PI payment CURRENT_PI PI payment MONTHLY_PI Monthly PMI CURRENT_MONTHLY_PMI Monthly PMI MONTHLY_PMI

Payment Schedule Comparison

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**REPEATING GROUP**

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Definitions

 

Original mortgage amount Original amount of your mortgage.   Appraised value The appraised value of your home when you purchased it.   Current term in years Total length of your current mortgage in years.   Years remaining Number of years remaining on your current mortgage.   Income tax rate Your current income tax rate.   Calculate balance To let the calculator determine your remaining balance, based on your original loan information and years remaining, check this box. To enter your own amount, leave this box unchecked.   Current Appraised value The current appraised value of your home.   Loan balance Balance of your mortgage that will be refinanced.   New interest rate The annual interest rate for the new loan.   New term in years Number of years for your new loan.   Loan origination rate This is the percentage of the new mortgage that is paid to the lender as the loan origination fee. Typically this fee is 1% of the loan balance.   Other closing costs Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other misc. fees paid.   Points paid This is the number of points paid to the lender to reduce the interest rate on the mortgage. Each point costs 1% of the new loan amount.   Current payment Your current payment is the sum of principal, interest and PMI (Principal Mortgage Insurance). Because refinancing does not affect your insurance or taxes, they are not included here.   New payment Your new payment is the sum of principal, interest and PMI.   Monthly PMI payment Monthly cost of Principal Mortgage insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year. The monthly PMI payment is calculated by multiplying your starting loan balance by this percent and dividing by twelve percent. When your loan balance exceeds 20% of the original purchase price, your PMI payment drops to zero.   Monthly PI payment Monthly principal and interest payment.   Breakeven monthly payment savings The number of months it will take for your monthly payment reduction to be greater than closing costs.   Breakeven PMI & interest savings The number of months it will take for your interest and PMI savings to exceed your closing costs.   Breakeven total savings after-tax The number of months it will take for your after-tax interest and PMI savings to exceed your closing costs.   Breakeven total savings vs. prepayment This is the most conservative breakeven measure. It is the number of months it will take for your after-tax interest and PMI savings to exceed both your closing costs and any interest savings from prepaying your mortgage. The prepayment amount used in this calculation is the amount that you would have to spend on closing costs.