Already on ArticleSlash?

Forgot your password? Sign Up

How to Calculate the Break Even Period When Refinancing Your Mortgage

Louie Latour
 


Visitors: 163

To save money when refinancing your mortgage it is helpful to know when your break-even period ends. This “break even period” when mortgage refinancing is the amount of time it takes to recoup your expenses from taking out the new loan. As a rule of thumb, the lower your new mortgage rate is compared to the old one, the shorter your break even period will be when refinancing.

One way to calculate your break even period is to divide the cost of your new mortgage by the amount of reduction in your monthly payment. While this will give you a general idea of your break even period it does not account for changes in the amortization schedule of your new loan. Here’s an example to illustrate this point.

Suppose you refinance your existing mortgage that had a balance of $100,000 and it costs you $3,500 in origination fees. The monthly payment of your new loan is now $1,015 which saves you $115 per month with a 15 year loan. Divide your expenses by the savings and you come up with approximately 30 months to recoup your expenses. This calculation does not take into consideration the shorter term length and lower interest rate of the new loan.

Calculating the break even point assumes you are refinancing with a lower interest rate and payment amount; however, there are perfectly good reasons for refinancing with a higher mortgage rate and payment amount. Many homeowners take a higher payment when refinancing with cash back or even shortening the term length. You can learn more about your mortgage refinancing options, including costly pitfalls to avoid with a free mortgage toolkit.

To get your FREE Mortgage Refinancing Video Toolkit, visit using the link below.

Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this “Mortgage Refinancing Toolkit, " which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit .

Get your free mortgage refinancing tutorial today at:

Mortgage Rate Lock

(360)

Article Source:


 
Rate this Article: 
 
Refinancing ARM Mortgage - Three Tips to Make Your ARM Home Mortgage Refinance ..
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Mortgage Refinancing – Rate Caps Protect You When Refinancing With an ..

by: Louie Latour (January 23, 2007) 
(Real Estate)

Mortgage Refinancing - The Basics of Refinancing Your Home Loan

by: Gary Clark (August 10, 2008) 
(Finance/Mortgage Refinance)

Use Online Mortgage Calculators to Calculate a Mortgage

by: Julie Viola (July 06, 2008) 
(Finance/Mortgage Refinance)

Calculate a Mortgage

by: Julita Viola (July 02, 2008) 
(Finance/Mortgage Refinance)

Break Up Pain the Importance of the Cool Down Period

by: R Fischer (July 01, 2008) 
(Relationships/Dating)

Mortgage Refinancing Information – Paying Points May Not Lower Your Mortgage ..

by: Louie Latour (January 20, 2007) 
(Real Estate)

Mortgage Refinancing: Mistakes in Your Credit Reports Will Damage Your Mortgage .

by: Louie Latour (January 24, 2007) 
(Real Estate)

Five Steps to Get the Best Mortgage Refinancing Deal and Have a Happy Home ..

by: Jerry Heng (November 05, 2008) 
(Finance/Mortgage Refinance)

Mortgage Refinancing Tips: Save Yourself Money and Headaches with Your New ..

by: Louie Latour (January 15, 2007) 
(Real Estate)

Refinancing ARM Mortgage - Three Tips to Make Your ARM Home Mortgage Refinance ..

by: Darin Sewell (September 23, 2008) 
(Finance/Mortgage Refinance)