1. What is Refinance Break Even?

The refinance break even point is the number of months it takes for the monthly savings from your new mortgage to equal the closing costs of refinancing. This helps determine if refinancing makes financial sense for your situation.

2. How Does the Calculator Work?

The calculator uses the break even formula:

Where:

• \( Closing\ Costs \) — Total fees paid to refinance (in dollars)
• \( Monthly\ Savings \) — Monthly payment reduction after refinancing (in dollars per month)

Explanation: The equation calculates how many months of savings are needed to recover your upfront refinancing costs.

3. Importance of Break Even Calculation

Details: Calculating your break even point helps determine if refinancing is worthwhile based on how long you plan to stay in the home. If you sell before reaching break even, you lose money on the refinance.

4. Using the Calculator

Tips: Enter your total closing costs and monthly payment savings. Both values must be positive numbers. The result shows how many months until you recoup your refinancing costs.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good break even period?
A: Typically, break even under 24 months is considered good, but this depends on how long you plan to keep the mortgage.

Q2: What costs should be included in closing costs?
A: Include all fees: application fee, appraisal, title search, title insurance, attorney fees, points, etc.

Q3: How do I calculate my monthly savings?
A: Subtract your new monthly payment from your current monthly payment (principal + interest + escrow).

Q4: Should I include taxes and insurance in savings?
A: Only if they're changing due to the refinance. Typically only principal and interest are considered.

Q5: Does this account for interest savings?
A: No, this simple calculation only looks at cash flow. For total cost analysis, consider an amortization comparison.