1. What is the Mortgage Interest Comparison Calculator?

The Mortgage Interest Comparison Calculator helps determine how many months it will take to break even when comparing different mortgage options. It calculates the time needed to recover upfront costs through monthly savings.

2. How Does the Calculator Work?

The calculator uses the break-even formula:

Where:

• \( C \) — Upfront costs (currency units)
• \( S \) — Monthly savings (currency units per month)

Explanation: This simple formula divides the total upfront costs by the monthly savings to determine how many months it will take to recover the initial investment.

3. Importance of Break-Even Analysis

Details: Break-even analysis is crucial for mortgage comparison as it helps borrowers understand when the benefits of a lower interest rate or better terms will outweigh the upfront costs of refinancing or switching mortgages.

4. Using the Calculator

Tips: Enter all upfront costs associated with the mortgage change, and the expected monthly savings. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What costs should be included in the calculation?
A: Include all upfront fees such as application fees, appraisal costs, closing costs, and any prepayment penalties from your current mortgage.

Q2: What counts as monthly savings?
A: Monthly savings typically include the difference in monthly payments between your current and new mortgage, plus any other recurring financial benefits.

Q3: Is a shorter break-even period always better?
A: Generally yes, but consider how long you plan to stay in the home. If you plan to move before reaching break-even, the change may not be worthwhile.

Q4: Should I consider tax implications?
A: Yes, consult with a tax professional as mortgage interest deductions may affect your actual savings.

Q5: Are there other factors to consider beyond break-even?
A: Yes, also consider changes in loan term, equity building, and overall financial goals when comparing mortgage options.