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 the monthly savings achieved. It helps in making informed financial decisions about whether refinancing is beneficial.
The calculator uses the simple break even formula:
Where:
Explanation: This straightforward calculation divides the total upfront costs by the monthly savings to determine how many months it will take to break even on the investment.
Details: Break even analysis is crucial for evaluating the financial viability of loan refinancing. It helps determine if the long-term savings justify the upfront costs and provides a clear timeframe for when the investment starts paying off.
Tips: Enter the total refinancing costs and your expected monthly savings. Both values must be positive numbers. The calculator will show you how many months it will take to recover your investment.
Q1: What costs should be included in the calculation?
A: Include all upfront costs such as application fees, appraisal fees, closing costs, and any other expenses associated with the refinancing process.
Q2: How do I calculate my monthly savings?
A: Subtract your new monthly payment from your current monthly payment. Include any changes in insurance or taxes if applicable.
Q3: What is considered a good break even period?
A: Typically, a break even period of 24 months or less is considered favorable for mortgage refinancing, but this can vary based on individual circumstances.
Q4: Should I refinance if I plan to move before breaking even?
A: Generally, no. If you plan to move before reaching the break even point, you may not recover the upfront costs through monthly savings.
Q5: Are there other factors to consider beyond break even?
A: Yes, consider changes in interest rates, loan term, equity building, and your long-term financial goals when making refinancing decisions.