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How long will it take to break even 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. This illustration shows an interest savings of $47,599 over a period of 30 years and a reduced payment of $157.85 per month available for investment. |
Until recently, the general rule of thumb was that a homeowner should look to refinance if the current rate was at least 2% lower than than the present mortgage. Over the last several years, home prices have accelerated so much, coupled with lower interest rates, a 1% to 1.5% decrease in the interest rate can reap a substantial cost savings. If you can recoup your extra refinancing costs within a 2 to 3 year period, then it is a good time to refinance. If you cannot breakeven within this time frame, the closings costs are too high in relationship to the mortgage amount and term in years. It is a good idea to plan on staying in the home for at least 5 years after refinancing. There are several reasons why a consumer may want to refinance, a lower interest rate will reduce the monthly payment, debt consolidation, and taking extra cash out for a major purchase. If you had made any prepayments during the term, you can uncheck the box "to calculate balance" and recalculate the correct balance yourself or call the mortgage company to
obtain the correct balance to plug in the loan balance. | |
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