Mortgage Refinance Breakeven

Will you save money by refinancing now? That depends on a multitude of factors. These factors include your existing interest rate, the current interest rates, 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.

Original loan amount
Original amount of your mortgage.
Original appraised value
The appraised value of your home when you purchased it.
Original interest rate
The interest rate for the original loan.
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 rate Married Filing Jointly or Qualified Widow(er) Single Head of household Married 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 $457,600 over $406,750 over $432,200 over $228,800
*Caution: Do not use these tax rate schedules to figure 2013 taxes. Use only to figure 2014 estimates. Source: 2014 preliminary tax brackets subject to correction

Calculate balance checkbox
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.
Loan balance
Balance of your mortgage that will be refinanced.
Current appraised value
The current appraised value of your home.
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 Private 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 (Private 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. This does not include escrows for items such as homeowner's insurance and real estate taxes.
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 you would realize from prepaying your mortgage with the cost of the closing costs on your new loan.

This calculator is for illustrative purposes only. The information shown is designed to provide basic information about mortgage financing. Please consult with your tax advisor to determine the tax impact of home ownership and interest deductibility for your individual circumstances.