Refinance Break-Even Calculator
Refinancing a mortgage offers an opportunity to save money if you can get a lower interest rate than you're currently paying. But refinancing costs money as well – closing costs can run from 2-6 percent of the loan amount. So how do you know if you're lowering your mortgage rate enough to offset those costs? This Refinance Break-Even Calculator will help you figure out how long it will take your savings from a reduced mortgage rate to offset the costs incurred by refinancing. It can also take into account the effect on your tax deductions and help you decide whether it's worth it to pay for discount points or not.
Financial Calculators from
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Original monthly payment: $1,500
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New monthly payment: $828
Break Even with $4,067 in closing costs
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Monthly Payment Breakdown
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Total Remaining Payments: Current $34,711, New $134,596
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Original mortgage amount
Original amount of your mortgage.
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.
Number of years remaining on your current mortgage.
Income tax rate
Your current income tax rate. Use the ‘Filing Status and Federal Income Tax Rates’ table to assist you in estimating your federal tax rate.
|Tax Rate||Married Filing Jointly or Qualified Widow(er)||Single||Head of Household||Married Filing Separately|
|*Caution: Do not use these tax rate schedules to figure 2018 taxes. Use only to figure 2019 estimates. Source: Rev. Proc. 2018-57|
|10%||$0 - $19,400||$0 - $9,700||$0 - $13,850||$0 - $9,700|
|12%||$19,400 - $78,950||$9,700 - $39,475||$13,850 - $52,850||$9,700 - $39,475|
|22%||$78,950 - $168,400||$39,475 - $84,200||$52,850 - $84,200||$39,475 - $84,200|
|24%||$168,400 - $321,450||$84,200 - $160,725||$84,200 - $160,700||$84,200 - $160,725|
|32%||$321,450 - $408,200||$160,725 - $204,100||$160,700 - $204,100||$160,725 - $204,100|
|35%||$408,200 - $612,350||$204,100 - $510,300||$204,100 - $510,300||$204,100 - $306,175|
|37%||Over $612,350||Over $510,300||Over $510,300||Over $306,175|
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.
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.
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.
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.
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 break even 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.
A mortgage refinance break-even calculator is used to calculate how long it will take to break-even on a mortgage refinance. It helps you calculate how long it will take your savings from a lowered mortgage rate to balance the cost for refinancing.
You might have heard several rules of thumb about refinancing. But knowing when you will break-even is a very important part of the refinance process. Different factors have to be taken into consideration; factors like bank fees, costs, third party costs, and escrow charges. Use our refinance break-even calculator to calculate your break-even point. Ensure that the additional time it takes to repay the loan does not exceed the amount you will get in savings.
Refinance break-even calculator is used to calculate the break-even point. This is the time it will take for the savings you get from refinancing to be greater than the cost. The break-even point calculator also calculates how much cost you will incur in paying taxes.
To calculate the break-even point, add the fees and the closing costs and divide the sum by your savings. For example: your total refinancing fee is $2000 and you save $100 every month. This then means your break-even point is 20 months from the time that you refinance.
To calculate the recoup of closing costs, first calculate the increase in your balance from closing costs. Then calculate how much you will save from your monthly mortgage payment of principal and interest. Divide your total closing cost by the savings to calculate how long it will take you to recoup your closing costs.
PMI stands for Private Mortgage Insurance. Depending on your mortgage lender, you might not need it in calculating your break-even point. When using the break-even calculator, check or uncheck the PMI option if it applies to you before you begin your calculation.
When you refinance into a shorter loan term or a lower interest rate, the amount of money you pay after breaking even is reduced. This consequently reduces the amount of money you have to pay to offset the loan. You can calculate the break-even interest rate using the break-even calculator.
Before refinancing, it is important to check the cost-benefit analysis. The cost includes loan origination fees, lender origination fees, appraisal fees, tax service fees, survey fees, attorney fees, and other fees, depending on your lender. Take these costs into account and compare them to the benefit before choosing to refinance.
Closing costs are typically 2 to 5 percent of the price of the house. The closing cost calculator uses the home price, your estimated down payment, and your mortgage interest to get your final closing cost. The closing cost is used in calculating the break-even point.
Cash-out refinancing allows you to take money out of your home equity and replaces your existing mortgage with a higher loan amount. You withdraw the difference between your existing mortgage and the new mortgage. This can be calculated using the break-even calculator.
Refinance Break-Even Calculator Overview
So when is it worthwhile to refinance your mortgage? The usual rule of thumb these days is that you should be able to reduce your mortgage rate by at least 1 percentage point when refinancing, but that's a fairly conservative figure. What really matters is how quickly you can recoup your closing costs compared to how long you'll have the mortgage.
Reducing your mortgage rate by a full percent might allow you to recover your closing costs in less than four years. That's pretty quick and would likely be worth your while. But if you're planning to move in the next three years, you won't recover your closing costs.
On the other hand, a refinance that takes eight years to recover your costs may offer only a marginal benefit. But if you have 20 years left on your mortgage, plan to stay in the home that long and don't expect rates to fall any lower, it could be worth considering.
Some people don't save as much as they expect when refinancing because they fail to take into account the tax impacts. If you itemize deductions, there's a good chance you take a deduction for mortgage interest. But if you refinance to a lower rate, your deduction shrinks and you pay more taxes. The calculator has a feature that lets you take that into account.
Using the Refinance Break-Even Calculator
The calculator is mostly self-explanatory, though a few things may need clarification:
- Under "Original mortgage" enter the appraised value of your home at the time you took out the loan. This is to allow the calculator to account for the cost of private mortgage insurance (PMI), if applicable.
- Enter your tax bracket percentage under "Income tax rate."
- Under "New mortgage" you can either enter your current mortgage balance or allow the calculator to figure it out for you, based on the regular amortization of your original loan.
- The "Loan origination rate" is the percentage of the loan amount your lender will charge for originating the loan. You can enter figures up to two decimal places if you wish.
- Use "Points paid" to see how paying for discount points would affect your break-even point.
- "Other closing costs" are fees charged by the lender in addition to the origination charge.
- The calculator normally figures the impact of PMI automatically; uncheck the PMI box if you wish to omit this from the calculation.
You'll be presented with four scenarios for your refinance break-even point:
- Monthly payment savings is based solely on the reduction in your monthly mortgage payment
- PMI and interest savings is based on the reduction in your monthly payment and the effect of paying or eliminating PMI
- Total savings after taxes takes into account the change in your mortgage interest tax deduction
- Total savings vs. prepayment adds the savings in mortgage interest you'd realize from paying your closing costs up front rather than rolling them into the loan.
If you chose a shorter term for your new mortgage than the time remaining on your old one, your savings will be reflected in the "Total remaining payments" box.
Clicking "View report" will provide a full breakdown of the old loan vs. the new one.
Want to get started? Use the "Get free quote" button at the top of the page to request personal refinance quotes from lenders.
- Mortgage refinance FAQ
- Mortgage refinance
- Fannie Mae
- FHA Streamline Refinance
- FHA Loans
- VA Loans
- Jumbo Loans
- Documents you need for a mortgage refinance
- Second mortgage
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