How to Correctly Calculate Mortgage Refinance Breakeven
Posted on May 13th, 2013
If you’re thinking about a refinance, you’ve probably come across the term “breakeven” and maybe even played around with a breakeven calculator. You might have contacted a mortgage lender and been given a “breakeven point” for a prospective refinance. Chances are pretty good that you’ve been given incorrect information.
Lies, Damn Lies, and Mortgage Breakeven Calculators
The most obvious way to calculate your refinance breakeven point involves finding out what your new payment will be and subtracting it from your old one. Then, you divide the cost of refinancing by the difference in payments to get the number of months it takes for the savings to pay for your refinance. It’s totally easy.
It’s also totally wrong.
The difference between your old payment and your new payment does NOT represent savings. I’ll prove that right now. Using a mortgage payment calculator, input the loan you currently have — your current balance and interest rate — …
Filed under Refinance, Saving Money, refinance calculator, refinancing | No Comments »
How to Correctly Calculate Mortgage Refinance Breakeven
Posted on May 13th, 2013
If you’re thinking about a refinance, you’ve probably come across the term “breakeven” and maybe even played around with a breakeven calculator. You might have contacted a mortgage lender and been given a “breakeven point” for a prospective refinance. Chances are pretty good that you’ve been given incorrect information.
Lies, Damn Lies, and Mortgage Breakeven Calculators
The most obvious way to calculate your refinance breakeven point involves finding out what your new payment will be and subtracting it from your old one. Then, you divide the cost of refinancing by the difference in payments to get the number of months it takes for the savings to pay for your refinance. It’s totally easy.
It’s also totally wrong.
The difference between your old payment and your new payment does NOT represent savings. I’ll prove that right now. Using a mortgage payment calculator, input the loan you currently have — your current balance and interest rate — …
Filed under Refinance, Saving Money, refinance calculator, refinancing | No Comments »