I'm looking for advice on calculating the breakeven point on a refinance when moving to a shorter-term mortgage. My payment will stay the same (basically).
Here are the background numbers:
Current mortgage: 30-year, 3.75%
New mortgage: 20-year, 2.75%
Closing costs: $3,700
The payment on the new mortgage is $50 more per month than the old mortgage
Amortization calculator
With a 20-year loan, I'll pay $500 more to principal each month (from day one) than with a 30-year loan.
Can I calculate my breakeven point as:
closing costs/$500 = 9 months until breakeven point
What is the mortgage balance? You calculate breakeven by taking the interest rate savings (1% in this case) times the mortgage balance. That's the $$ saved in a year roughly.
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Nate79 wrote: ↑Thu May 06, 2021 9:53 pm
What is the mortgage balance? You calculate breakeven by taking the interest rate savings (1% in this case) times the mortgage balance. That's the $$ saved in a year roughly.
Not quite. The answer is in months.
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