The “Short-term Analysis” graph may be used to illustrate the BE (breakeven) point, which is the middle graph of the three appearing on a TCA.

In the TCA linked below, for Strategy 1 (interest rate of 6.5%) the BE (breakeven point) occurs in 16 months, while in Strategy 2 (interest rate of 6.25%) it will take the borrower 18 months to begin saving more than their current loan after taking into consideration closing costs and interest paid.

This is illustrated by the *Savings in 16 months* Short-term Analysis chart in this sample borrower presentation: https://mcedge.tv/q2rixx

When you click *More Info* in the *Summary* table and display the *Closing Costs* detail, you’ll see that the difference is the $2,019.79 the borrower is paying in points to get the better 6.25% rate.

How Breakeven is Calculated

You can easily see the monthly payment difference in the first TCA chart:

Most loan officers will argue that the breakeven point is calculated by the formula BE = Closing Costs/Monthly Savings, neglecting to take into account the interest paid on the loans (which is definitely an expense).

- Using the BE=Closing Costs/Monthly Savings formula, the breakeven for Strategy 1 would be: $4,678 Closing Costs/$256.34 Monthly Savings = 18.25 months
- Using Mortage Coach, we also take
*Interest & MI*paid into account:

Total Cost Current Loan = Interest & MI (if applicable) Paid on Current Loan = $39,484

Total Cost Strategy 1 = Interest & MI (if applicable) Paid + Closing/Points = $39,270

Therefore, at month 16, Strategy 1 < Current Loan, because $39,270 < $39,484, by $214**Note:**For the current loan and each loan strategy proposed, click*View Details*on the*Savings Over 16 months*chart to find detail on*Interest & MI Paid*and*Closing/Points:*

**Refer to this sample Total Cost Analysis presentation:** https://mcedge.tv/q2rixx

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