Refinance Break-Even Calculator for Mortgages

Estimate the monthly payment difference and months needed to recover refinancing closing costs using current balance, rates, and remaining loan terms.

Compare the current and new amortizing payments on the same balance, then divide closing costs by monthly savings to get break-even months.

Estimate the monthly payment difference and months needed to recover refinancing closing costs using current balance, rates, and remaining loan terms.

Current Loan Balance

Current Interest Rate (%)

Remaining Term (Years)

New Interest Rate (%)

New Loan Term (Years)

Closing Costs

About refinance break-even

A refinance only pays for itself if you keep the loan long enough for the lower payment to recover what you spend to close. The refinance break-even calculator rebuilds both payments with the standard amortization formula on the current balance, then divides closing costs by the monthly savings. If you spend $6,000 to save about $177 a month, break-even is roughly 34 months. Move before that point and the refinance is a net cash loss on the payment comparison alone. Each payment is M = P × r × (1 + r)^n / ((1 + r)^n − 1), where P is the current balance, r is the annual rate divided by 12, and n is years × 12. The current payment uses the remaining term and the existing rate. The new payment uses the offered rate and the new term. Monthly savings can be negative if you shorten the term enough that the payment rises; in that case there is no payment-based break-even even if you will pay less interest over the life of the loan. Homeowners use break-even when a 0.5–1.0 point rate drop looks attractive on a quote sheet. It is the right first filter if you might sell, relocate, or recast within a few years. It is the wrong sole metric if you refinance to cash out, to switch from ARM to fixed, or to cut the term and pay more each month on purpose. Closing costs should include origination, appraisal, title, and credits you will actually pay, whether in cash or rolled into the new balance. The months-to-recover figure ignores tax deductibility of interest, points, and the extra interest that appears if costs are financed. It also ignores remaining-interest totals. Treat it as a cash-flow hurdle: if you will not stay past break-even, keep the current loan unless another non-payment reason dominates. Confirm fees on a Loan Estimate and speak with a lender or adviser before you lock.

Refinance break-even examples

Payments are fully amortizing on the stated balance; break-even is closing costs divided by monthly savings.

Inputs	Result	What it shows
Balance $300,000; 7% for 20 years to 6% for 20 years; $6,000 costs	Payments $2,325.90 vs $2,149.29; savings $176.60; break-even 34.0 months	A same-term rate cut recovers fees in under three years.
Same loan to 6% for 15 years; $6,000 costs	New payment $2,531.57; savings −$205.67; no payment break-even	A shorter term can raise the payment even at a lower rate.
Balance $300,000; 7% for 20 years to 5.5% for 20 years; $9,000 costs	New payment $2,063.66; savings $262.23; break-even 34.3 months	Higher costs need a larger rate cut to keep a similar hurdle.

How to calculate refinance break-even

Enter the current principal balance, interest rate, and remaining term in years.
Enter the new interest rate and the new loan term in years.
Enter closing costs you will pay in cash or finance.
Select Calculate and compare break-even months with how long you expect to keep the home.

Refinance break-even FAQ

How is break-even calculated?

Both payments are standard amortizing payments on the current balance. Break-even months equal closing costs divided by the monthly payment reduction. If the new payment is not lower, there is no payment-based break-even.

Should I include points in closing costs?

Yes, if you will pay them. Discount points, origination, appraisal, title, and recording fees belong in the cost figure so break-even is not understated.

Why might savings be negative?

Shortening the term raises the payment even when the rate falls. You may still save interest over the full term, but the payment comparison will not show a break-even month.

Does break-even include tax savings?

No. Interest deductibility, point amortization, and state tax treatment are omitted. After-tax break-even can be longer if the old loan produced larger deductions.

What if I roll closing costs into the new loan?

The payment formula still uses the balance you enter. If costs will be financed, add them to the balance or keep them in closing costs so the hurdle is not hidden.