Refinance Breakeven
Mortgage Refinance Breakeven

Breakeven Measures

The table below lists four different breakeven 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.

Measure
Months
Definition
1. Monthly payment savings:
BREAK_EVEN_PAYMENTS
The number of months it will take for your monthly payment reduction to be greater then your closing costs.

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

3. Total savings after tax:
BREAK_EVEN_TAX_INTEREST
The 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.

4. Total savings vs. prepayment:
BREAK_EVEN_PREPAY
This 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.

Original Loan
New Loan
Mortgage amountORIGINIAL_LOAN_AMT Mortgage amountNEW_LOAN_BALANCE
Appraised valueOLD_LOAN_APPRAISED_VALUE Appraised valueNEW_LOAN_APPRAISED_VALUE
Interest rateCURRENT_RATE Interest rateNEW_RATE
Term in yearsCURRENT_LENGTH Term in yearsNEW_LENGTH
Years remainingCURRENT_YEARS_REMAINING Years remainingNEW_LENGTH
PI paymentCURRENT_PI PI paymentMONTHLY_PI
Monthly PMICURRENT_MONTHLY_PMI Monthly PMIMONTHLY_PMI

Payment Schedule Comparison


**REPEATING GROUP**



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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. 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.



Loan approval is not guaranteed and is subject to verification of specific information that is requested at time of application.  Specified rates may not be available for all borrowers.  Rates are subject to change.

California Dept. of Real Estate, Broker #01050210

Cobalt Financial Corporation headquarters:
10935 Vista Sorrento Parkway, Suite 350, San Diego, CA 92130


Randy Erickson Real Estate Investments Inc. 701 7th Street Hermosa Beach, CA 90254
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