Refinance Calculator
: Calculate Breakeven & determine if refinancing is right for you
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Mortgage Refinance Calculator - Breakeven
Refinancing your mortgage or loan at a lower interest rate can generate significant savings. This
Refinance Calculator
determines the length of time it will take for the savings from refinancing at a lower interest rate to equal or offset the closing costs (points, fees, etc.) incurred to refinance – the breakeven.
Refinance Breakeven Calculator - Definitions
How long will it take to breakeven on a mortgage refinance? That depends on a multitude of factors. These factors include your current mortgage interest rate, the new interest rate, closing costs and how long you plan to stay in your home. Use this refinance calculator to sort through the factors, and determine if refinancing your mortgage is the right financial decision. Click the "View Report" button for a detailed look at your records.
Generally,
mortgage refinancing
makes financial sense if you plan to remain in your home longer than the length of time necessary to recoup the refinancing costs.
Original mortgage amount - Original amount of your mortgage loan.
Appraised value - The appraised value of your home when you purchased it.
Current term in years - Total length of your current mortgage loan in years.
Years remaining - Number of years remaining on your current mortgage loan.
Income tax rate - Your current income tax rate.
Calculate balance - To let the calculator determine your remaining loan 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 loan that will be refinanced.
New interest rate - The annual interest rate for the new mortgage loan.
New term in years - Number of years for your new mortgage loan.
Loan origination rate - This is the percentage of the new mortgage loan that is paid to the lender as the loan origination fee. Typically this fee is 1% of the mortgage loan balance.
Other closing costs - Estimate of all other closing costs for this mortgage loan. This should include filing fees, appraiser fees and any other miscellaneous fees paid.
Points paid - This is the number of points paid to the lender to reduce the interest rate on the mortgage loan. Each point costs 1% of the new mortgage 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 Private Mortgage Insurance (PMI). For mortgage loans secured with less than 20% down, PMI is estimated at 0.5% of your mortgage loan balance each year. Monthly PMI is calculated by multiplying your starting mortgage loan balance by this percent and dividing by 12. When the equity in your home exceeds the percentage required for PMI, 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 - refinance breakeven.
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 refinance 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 loan. The prepayment amount used in this calculation is the amount that you would have to spend on closing costs.