| 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.
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.
|
|