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.
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Current Mortgage Rate Information
Mortgage
Refinance Rate Information
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.
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