Home
Back
Break Even Formula:
| From: | To: |
The break even calculation determines how many months it will take to recover the costs associated with loan refinancing or transfer through monthly savings. It helps borrowers make informed decisions about whether refinancing is financially beneficial.
The calculator uses the break even formula:
Where:
Explanation: This simple division calculates how many months of savings are needed to offset the upfront costs of refinancing.
Details: Break even analysis is crucial for determining the financial viability of loan refinancing. It helps borrowers understand when they will start realizing net savings and whether the long-term benefits justify the upfront costs.
Tips: Enter all costs associated with the loan transfer (application fees, legal fees, etc.) and the expected monthly savings from the new loan terms. Both values must be positive numbers.
Q1: What costs should be included in the calculation?
A: Include all upfront costs such as application fees, appraisal fees, legal fees, and any other charges associated with the loan transfer.
Q2: How do I calculate monthly savings?
A: Subtract your new monthly payment from your current monthly payment. Include any changes in insurance or other associated costs.
Q3: What is considered a good break even period?
A: Generally, a break even period of less than 24 months is considered favorable, but this depends on individual circumstances and how long you plan to keep the loan.
Q4: Should I consider other factors besides break even?
A: Yes, also consider total interest savings over the loan term, changes in loan duration, and any prepayment penalties on your current loan.
Q5: Does this calculation work for all types of loan refinancing?
A: This calculation is most applicable to mortgage and personal loan refinancing where there are clear upfront costs and monthly payment differences.