Refinancing mid-term costs money - a penalty, legal/discharge fees, sometimes an appraisal. This tool weighs those costs against your monthly savings and tells you the real break-even date and net dollars saved over the new term.
Balance, contract rate, and remaining amortization.
New rate and amortization you're considering.
Prepayment penalty plus legal, discharge, and appraisal fees.
Usually the length of the new term, most often 5 years.
See monthly savings, the break-even date, and net dollars saved over the horizon.
On a variable-rate mortgage the penalty to break is almost always three months of interest - a clean, predictable number. On a fixed-rate mortgage, lenders use the interest rate differential (IRD).
The Big-5 banks calculate IRD off their inflated posted rate, which can produce penalties of $15,000–$30,000+. Mortgage finance companies use the rate they actually offer in market - penalties are usually a tenth of that.
Saving on rate is one reason to refi - but plenty of files refinance to pull equity, consolidate high-interest debt, restructure after a life change, or switch from a variable.
This calculator only handles the rate-switch case. For the others, send me your statement and I'll run the actual numbers for your situation.
Tools built by Jeremy LaHaie, mortgage professional with INVIS Inc., serving Winnipeg, Ste Anne, Steinbach, and all of Southeast Manitoba. Call or text (204) 995-7336.