Break Mortgage Calculator

Deciding to break your mortgage early can save you thousands of dollars in interest payments, but it also comes with costs and considerations. Our break mortgage calculator helps you estimate the potential savings and understand the financial implications of refinancing your mortgage.

How to Use This Calculator

To use the break mortgage calculator, follow these simple steps:

Enter your current mortgage balance in the "Current Balance" field.
Select the term of your current mortgage from the dropdown menu.
Enter your current interest rate in the "Current Interest Rate" field.
Enter the amount you plan to pay toward breaking your mortgage in the "Break Amount" field.
Click the "Calculate" button to see your estimated savings.

The calculator will display your estimated savings, the new mortgage balance after the break, and the new monthly payment amount.

Formula Used

The break mortgage calculator uses the following formula to calculate your estimated savings:

Estimated Savings = (Current Balance × Current Interest Rate × Original Term) - (Current Balance × Current Interest Rate × Remaining Term) - Break Amount

Where:

Current Balance is the remaining balance on your mortgage.
Current Interest Rate is the current annual interest rate on your mortgage.
Original Term is the original term of your mortgage in years.
Remaining Term is the remaining term of your mortgage in years after the break.
Break Amount is the amount you plan to pay toward breaking your mortgage.

This formula assumes that you will refinance your mortgage at the same interest rate and term as your current mortgage.

Worked Example

Let's say you have a $200,000 mortgage with a 5-year term and a 4% interest rate. You want to break your mortgage after 2 years by paying $50,000 toward the principal.

Using the formula:

Estimated Savings = ($200,000 × 0.04 × 5) - ($200,000 × 0.04 × 3) - $50,000

Estimated Savings = $40,000 - $24,000 - $50,000 = -$34,000

In this example, breaking your mortgage would result in a net loss of $34,000 due to the high break amount and the remaining interest payments.

Note: This is a simplified example. Actual savings may vary based on your specific circumstances and the terms of your new mortgage.

Factors to Consider When Breaking Your Mortgage

Before deciding to break your mortgage, consider the following factors:

Refinancing Costs: Breaking your mortgage typically involves refinancing, which can incur closing costs and fees.
Interest Rate Changes: If interest rates have risen since you originally took out your mortgage, breaking your mortgage may not save you money.
Loan Terms: Make sure you understand the terms of your new mortgage, including the interest rate, term, and any prepayment penalties.
Tax Implications: Breaking your mortgage may have tax implications, so consult a tax professional for advice.

Comparison of Breaking vs. Continuing Your Mortgage

Factor	Breaking Mortgage	Continuing Mortgage
Interest Payments	Lower if interest rates have decreased	Higher if interest rates have increased
Refinancing Costs	Closing costs and fees	None
Flexibility	More flexibility in loan terms	Less flexibility
Risk	Higher risk of losing money if interest rates rise	Lower risk

Frequently Asked Questions

How much can I save by breaking my mortgage?

The amount you can save by breaking your mortgage depends on your current mortgage balance, interest rate, term, and the amount you plan to pay toward breaking your mortgage. Use our break mortgage calculator to estimate your potential savings.

Is it always a good idea to break my mortgage?

Breaking your mortgage may not always be a good idea. It's important to consider the costs and benefits, including refinancing costs, interest rate changes, and tax implications. Consult a financial advisor for personalized advice.

What are the costs of breaking my mortgage?

The costs of breaking your mortgage include refinancing costs, such as closing costs, appraisal fees, and title insurance. These costs can vary depending on your location and the terms of your new mortgage.

Can I break my mortgage if I have a fixed-rate mortgage?

Yes, you can break your mortgage if you have a fixed-rate mortgage. However, you may be subject to prepayment penalties or other restrictions. Make sure you understand the terms of your mortgage before breaking it.

How do I know if breaking my mortgage is right for me?

Breaking your mortgage may be right for you if you can save money on interest payments and you understand the costs and benefits. However, it may not be the best option if interest rates have risen or if you have other financial priorities. Consult a financial advisor for personalized advice.