You will save
on the interest of the loanYou will owe
in interest and will pay your loan off
Original Loan Amount
The original amount borrowed from a lender to obtain a mortgage loan. This represents the total mortgage amount including fees, points, etc… as stated on the closing disclosure.
The amount of time saved on the current loan schedule by making additional payments toward the principal mortgage balance.
The amount of time (usually expressed in years) in which a borrower is required to make monthly payments toward a home loan.
The annual cost to borrow money from a lender based on a percentage of the loan amount. Interest rates exclude mortgage "points" and fees charged to get the loan.
Your lifetime savings is an estimate of the amount of money you may save over the life of your loan should you choose a new mortgage.
Additional Principal Payment
Extra payments applied to the mortgage above the monthly requirement. These payments are typically used to settle existing late charges or fees before being applied to the principal.
What’s the cost to refinance a mortgage?
We have an entire article that explains the various costs associated with refinancing a mortgage. It’s common for borrowers to spend thousands of dollars on closing costs alone. There are also a number of fees to account for, including origination fees, an appraisal fee, and a home inspection fee.
Defining the break-even point on a mortgage refinance
So how can you figure out when you’ll break even on your new loan? All you have to do is calculate when your monthly savings become greater than the refinancing costs.
Let’s consider an example. Say you spent $4,000 in fees on a recent mortgage refinance and will be saving $400 a month. Some quick math tells us that 4,000 divided by 400 is 10, meaning your break-even point is 10 months.
The amount of time you plan to stay in your home should factor into your decision to refinance. If you’re hoping to move in the next year, a refinance probably doesn’t make sense. That said, if your break-even point isn’t for five years but you intend to remain in the house for the foreseeable future, it may be worth moving forward with the process.
Schedule a free mortgage review with one of our dedicated consultants to know for sure.
We encourage you to explore the above mortgage refinance calculator and determine when the savings outweigh the costs. Remember that every borrower’s situation is different. And don’t forget to reach out to one of our mortgage experts for individualized advice as it relates to refinancing.