Mortgage Refinance Breakeven - Definitions
| Term | Definition |
| Original mortgage amount | Original amount of your mortgage. |
| Appraised value | The appraised value of your home when you purchased it. |
| Current term in years | Total length of your current mortgage in years. |
| Years remaining | Number of years remaining on your current mortgage. |
| Income tax rate | Your current income tax rate. |
| Calculate balance | To let the calculator determine your remaining balance, based on your original loan information and years remaining, check this box. To enter your own amount, leave this box unchecked. |
| Current Appraised value | The current appraised value of your home. |
| Loan balance | Balance of your mortgage that will be refinanced. |
| New interest rate | The annual interest rate estimated based on current market rates for the new loan. |
| APR | The APR (annual percentage rate) is the yearly rate of interest and other fees paid to acquire the loan. The APR calculation incorporates fees and interest into a single rate. Lenders are required by law to disclose the APR. This rate is used to compare various loans. |
| New term in years | Number of years for your new loan. |
| Loan origination rate | This is the percentage of the new mortgage that is paid to the lender as the loan origination fee. Typically this fee is 1% of the loan balance. |
| Other closing costs | Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other misc. fees paid. |
| Points paid | This is the number of points paid to the lender to reduce the interest rate on the mortgage. Each point costs 1% of the new loan amount. |
| Current payment | Your current payment is the sum of principal, interest and PMI. Because refinancing does not affect your insurance or taxes they are not included here. |
| New payment | Your new payment is the estimated sum of principal, interest and PMI. |
| Monthly PMI payment | Monthly cost of Principal Mortgage insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by this percent and dividing by 12. When your loan balance exceeds 20% of the original purchase price, your PMI payment drops to zero. |
| Monthly PI payment | Monthly principal and interest payment. |
| Break even monthly payment savings | The number of months it will take for your monthly payment reduction to be greater than your closing costs. |
| Break even PMI & interest savings | The number of months it will take for your interest and PMI savings to exceed your closing costs. |
| Break even total savings after tax | The number of months it will take for your after tax interest and PMI savings to exceed your closing costs. |
| Break even total savings vs. prepayment | This is the most conservative break even measure. It is the number of months it will take for your after tax interest and PMI savings to exceed both your closing costs and any interest savings from prepaying your mortgage. The prepayment amount used in this calculation is the amount that you would have to spend on closing costs. |