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.

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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 miscellaneous 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. Monthly PMI is calculated by multiplying your starting 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.

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.