Why Use the Refinance Break-even Calculator?

Use the refinance break-even calculator to determine whether now is the time to refinance

The decision to refinance your home can depend on several factors, including how long you plan to be in the home, the current value of your home, market interest rates and when you will break even on the loan. A refinance break-even calculator can help you weigh these factors to create projections for future payments and the moment you could break even.

Why the break-even point is important

The break-even point on a refinance is when you have started saving enough from the new loan to offset any refinancing costs. There are several ways you can save with home refinancing:

  • Reduced monthly payments
  • Lower overall interest and private mortgage insurance
  • Total savings after taxes
  • Total savings vs. prepayment

Depending on your reason to refinance, you may want to focus on one area of savings. For instance, suppose the market has improved and a significantly lower rate is available. You could restructure your payment so you might pay less in the long run. Your monthly payments would be lower and they would consist of more principal than before, paying off your balance at a steadier rate over time. The downside is that you could be making payments for a longer period of time, but if the savings outweigh the longer mortgage term, then it could be worth it. The refinance break-even calculator will give you a visual representation of your old and new payment structure to make the decision easier.

Factors to consider when looking at your home refinancing options

Even if you can get a great low rate and reduce your monthly payments, there are other factors to consider with a refinance.

  • How long until you see savings with your new loan? If you're planning to move before or shortly after that time period, it might not be worth the refinance.
  • Are you refinancing for the new rate or do you need a home equity loan or line of credit? If you're trying to free up money for home renovations, you may want to consider home equity refinancing. You can use our home equity refinance calculator to help determine just how much equity you can borrow.
  • Which is better, refinancing your loan or continuing under the same loan making prepayments? Some people might think they can save by simply paying down more of the principal each month, and you can! However, you might be able to save significantly more with a refinance, which you can still prepay if you want to.

The refinance break-even calculator can help you compare several of these options on a monthly and yearly basis to make your decision. Once you have a good idea of what you'd like to do, talk to your lender. They can help guide you to the right decision using the current rates and draw up your new home refinancing package. For more information on mortgages and refinancing, speak to a Citizens Bank home loan advisor.


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