Determine exactly how many months it will take for your refinance savings to cover your closing costs.
Your Calculation Results
How the Refinance Break-Even Point Works
When you refinance your mortgage, you are essentially swapping your current loan for a new one, typically with a lower interest rate. However, this process isn't free. Lenders charge fees, often called closing costs, which can include appraisal fees, origination charges, and title insurance.
The Break-Even Point is the moment when the total amount you have saved on your monthly mortgage payments equals the total amount you paid in closing costs. If you plan to move before hitting this point, refinancing might actually cost you more than you save.
The Break-Even Formula
Total Closing Costs รท Monthly Savings = Months to Break Even
Real-Life Example
Current Payment: $2,100
New Payment: $1,850
Monthly Savings: $250
Closing Costs: $6,000
Calculation: $6,000 / $250 = 24 Months
In this scenario, you would need to stay in your home for at least two years to justify the cost of the refinance.
Factors to Consider Before Refinancing
Loan Duration: If you restart a 30-year clock after already paying 5 years into your current loan, you may pay more interest over the long term, even with a lower rate.
Opportunity Cost: Could the money spent on closing costs earn a higher return if invested elsewhere?
Tax Implications: Mortgage interest is often tax-deductible; a lower interest payment might slightly reduce your tax deduction.
function calculateRefiBreakEven() {
var curr = parseFloat(document.getElementById('currentPayment').value);
var next = parseFloat(document.getElementById('newPayment').value);
var costs = parseFloat(document.getElementById('closingCosts').value);
var resultsDiv = document.getElementById('resultsArea');
var output = document.getElementById('outputContent');
if (isNaN(curr) || isNaN(next) || isNaN(costs) || curr <= 0 || next <= 0 || costs < 0) {
resultsDiv.style.display = 'block';
resultsDiv.style.borderLeftColor = '#d93025';
output.innerHTML = 'Please enter valid positive numbers for all fields.';
return;
}
var monthlySavings = curr – next;
if (monthlySavings <= 0) {
resultsDiv.style.display = 'block';
resultsDiv.style.borderLeftColor = '#d93025';
output.innerHTML = 'Monthly Savings: $0 or lessYour new payment is higher than or equal to your current payment. You will not reach a break-even point because you are not saving money monthly.';
return;
}
var breakEvenMonths = costs / monthlySavings;
var breakEvenYears = (breakEvenMonths / 12).toFixed(1);
resultsDiv.style.display = 'block';
resultsDiv.style.borderLeftColor = '#1a73e8';
var html = 'Monthly Savings:$' + monthlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + '';
html += 'Time to Break Even:' + Math.ceil(breakEvenMonths) + ' months (approx. ' + breakEvenYears + ' years)';
if (breakEvenMonths > 60) {
html += 'Note: It will take over 5 years to break even. Ensure you plan to stay in the home long enough for the refinance to be profitable.';
} else {
html += 'This appears to be a strong refinance candidate if you plan to stay in the property for more than ' + Math.ceil(breakEvenMonths) + ' months.';
}
output.innerHTML = html;
}