Mortgage Refinance Break Even

How long will it take to break even on a mortgage refinance? That depends on a multitude of factors including 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 Break Even

The table below lists four different break even 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. **GRAPH**

MeasureMonthsDefinition
Monthly payment savings:BREAK_EVEN_PAYMENTSThe number of months it will take for your monthly payment reduction to be greater then your closing costs.

PMI & interest savings:BREAK_EVEN_INTERESTThe number of months it will take for your interest and PMI savings to exceed your closing costs.

Total savings after tax:BREAK_EVEN_TAX_INTERESTThe 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.

Total savings vs. prepayment:BREAK_EVEN_PREPAYThis 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 PMI_PERCENT of your home's current appraisal price. **GRAPH**
Original LoanNew Loan
Mortgage amountORIGINAL_LOAN_AMTMortgage amountNEW_LOAN_BALANCE
Appraised valueOLD_LOAN_APPRAISED_VALUEAppraised valueNEW_LOAN_APPRAISED_VALUE
Interest rateCURRENT_RATEInterest rateNEW_RATE
Term in yearsCURRENT_LENGTHTerm in yearsNEW_LENGTH
Years remainingCURRENT_YEARS_REMAININGYears remainingNEW_LENGTH
PI paymentCURRENT_PIPI paymentMONTHLY_PI
Monthly PMICURRENT_MONTHLY_PMIMonthly PMIMONTHLY_PMI
Total interest remainingCURRENT_TOTAL_INTERESTTotal interestTOTAL_INTEREST
DIFFERENCE_TOTAL_INTEREST
**GRAPH**

Payment Schedule Comparison

**REPEATING GROUP**

Mortgage Refinance Break Even Definitions

Original mortgage amount
Original amount of your mortgage.
Appraised value
The appraised value of your home when you purchased it.
Current interest rate
The annual interest rate for the original loan.
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. Use the table below to assist you in estimating your Federal 2014 tax rate.
Filing Status and Income Tax Rates 2014*
Tax RateMarried Filing Jointly or Qualified Widow(er)SingleHead of HouseholdMarried Filing Separately
10%$0 - $18,150$0 - $9,075$0 - $12,950$0 - $9,075
15%$18,150 - $73,800$9,075 - $36,900$12,950 - $49,400$9,075 - $36,900
25%$73,800 - $148,850$36,900 - $89,350$49,400 - $127,550$36,900 - $74,425
28%$148,850 - $226,850$89,350 - $186,350$127,550 - $206,600$74,425 - $113,425
33%$226,850 - $405,100$186,350 - $405,100$206,600 - $405,100$113,425 - $202,550
35%$405,100 - $457,600$405,100 - $406,750$405,100 - $432,200$202,550 - $228,800
39.6%over $457,600over $406,750over $432,200over $228,800
*Caution: Do not use these tax rate schedules to figure 2013 taxes. Use only to figure 2014 estimates. Source: 2014 tax brackets http://www.irs.gov
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.
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.
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.
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.

Normally PMI is required if you have less than 20% equity in your home, however for the refinance of loan guaranteed by Freddie Mac or Fannie Mae you may not be required to pay PMI if your current mortgage doesn't require it. Check with your lenders for details. Check the box 'do NOT include PMI' if this applies to your refinance.

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 PI payment
Monthly principal and interest payment.
Break even monthly payment savings
The number of months it will take for your monthly payment reduction to be greater than closing costs.
Break even PMI & interest savings
The number of months it will take for your interest and PMI savings to exceed your closing costs.
Break even total savings after-tax
The number of months it will take for your after-tax interest and PMI savings to exceed your closing costs.
Break even 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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