Refinance Break-Even Calculator
See whether refinancing pays off: compare your current mortgage to a new rate and term, with the monthly savings, the break-even month on closing costs, and the lifetime interest difference.
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Disclaimer: This free tool is provided “as is,” without warranties of any kind, and is for general informational purposes only — not professional, legal, financial, medical, tax, or engineering advice. Results may contain errors; verify anything important independently and use at your own risk. We accept no liability for any loss or damage arising from its use. See our Terms of Use for details.
Step-by-Step Guide
Enter your current loan balance, the current interest rate, and the number of years remaining on the existing mortgage. Then enter the proposed new interest rate, the new loan term in years, and the total closing costs (including origination fees, title insurance, appraisal, and any discount points). The calculator runs two parallel amortization schedules, one for each loan, and computes the monthly savings, the break-even month, and the difference in total lifetime interest cost.
What the break-even calculation means
The break-even month is simply your closing costs divided by the monthly savings. If refinancing saves you $350 a month and closing costs are $6,000, break-even is 6,000 ÷ 350 ≈ 17 months. If you plan to stay in the home longer than 17 months, refinancing saves money in the long run. If you move sooner, you pay the closing costs without recouping them. A longer new term resets the amortization clock, so even a lower monthly payment may cost more in total interest if the term is extended significantly — the calculator shows both the monthly and the lifetime comparison so you can weigh them separately.
Current balance $280,000 at 7.5% with 27 years remaining; refinancing to 5.75% / 30 years with $6,000 in closing costs: the current payment on $280k at 7.5% / 27y is roughly $2,020; the new payment at 5.75% / 30y is about $1,634 — a $386 monthly saving. Break-even: 6,000 ÷ 386 ≈ 16 months. However, the 30-year term adds 3 years of payments, so lifetime interest cost may be higher despite the lower rate — the calculator shows both figures.
Who it's for
Homeowners considering a refinance and mortgage brokers.
Core Features
- Side-by-side current vs new monthly payment and the monthly delta.
- Break-even month = closing costs ÷ monthly savings, with a years readout.
- Lifetime interest of each loan (closing costs included) and the difference.
- Flags when the new payment is higher and there is no monthly break-even.
🛡️ No tracking — your inputs, keys, and details never leave this client sandbox.
How do I know if refinancing is worth it?
The core test is whether you will stay in the home long enough to recoup the closing costs through monthly savings. The break-even month answers that question directly: if your savings of $350/month and closing costs of $7,000 give a break-even of 20 months, you need to own the home for at least 20 more months to benefit. Beyond break-even, every additional month the new rate saves you money. The lifetime interest comparison tells you the full picture even if the monthly savings look attractive.
Does refinancing always lower my monthly payment?
Not necessarily. If you refinance from a shorter remaining term (say, 20 years left) into a new 30-year loan, the payment may drop because the remaining balance is spread over more years — but total interest cost usually rises substantially. Conversely, refinancing into a shorter term (15 years) typically raises the monthly payment but cuts lifetime interest dramatically. The calculator flags when the new payment is higher and there is no monthly savings break-even.
What closing costs should I include?
Typical refinance closing costs range from 2% to 5% of the loan amount and include lender origination fees, an appraisal fee ($300–$700), title insurance, recording fees, and prepaid items like homeowners insurance and property taxes. Discount points (prepaid interest) are an optional upfront cost that buys a lower rate — include them if you are paying any. Some lenders offer a 'no-closing-cost refinance' where the costs are rolled into the rate or balance; enter those as closing costs to see the true trade-off.
What is the rate-and-term difference that makes refinancing worthwhile?
The old rule of thumb was that a rate drop of at least 1 percentage point justified refinancing, but that benchmark is outdated and imprecise. On a large balance, even a 0.5-point drop produces hundreds of dollars in monthly savings that recover closing costs quickly. On a small remaining balance with only a few years left, even a 2-point drop may not be worth the closing costs. Use the break-even calculation rather than a rule of thumb.
The surprising fact about refinancing: a lower payment can cost you more money
A homeowner with 22 years left on a 30-year mortgage refinances into a new 30-year loan at a rate 1.5 points lower. The monthly payment drops by $450 — a clear win, right? Over the life of the loan, they pay an extra 8 years of payments. Even at the lower rate, those additional 96 months can add more in total interest than the lower rate saves, resulting in a higher lifetime cost despite the smaller monthly bill. This is the refinancing trap that monthly-savings-only thinking misses, and it is exactly what the break-even and lifetime interest comparison are designed to show.
How experts use refinance math differently than beginners
Beginners look at the monthly savings and stop. Experienced homeowners run three separate comparisons. First, the break-even: closing costs ÷ monthly savings gives the number of months needed to recoup the transaction cost. If they plan to sell before that point, refinancing loses money regardless of the rate. Second, the lifetime interest comparison: total interest on the existing loan versus total interest on the new loan, with closing costs added to the new loan's cost. Third, the term question: refinancing into a shorter term (15 vs. 30 years) at a lower rate often raises the monthly payment but can save hundreds of thousands in interest — a trade worth modeling explicitly.
The two amortization schedules
The calculation requires running two parallel amortization schedules: one for the remaining life of the current loan, and one for the proposed new loan. The monthly payment formula is P = L × [r(1+r)^n] / [(1+r)^n − 1]. For the existing loan, L is the current outstanding balance and n is the remaining months. For the new loan, L is the refinanced amount (which may differ if costs are rolled in) and n is the new term. The difference in monthly payment is the savings; dividing the closing costs by the savings gives the break-even month.
What this tool cannot do
The calculator models a straightforward rate-and-term refinance. It does not model cash-out refinancing, where you borrow more than the current balance to access equity. It does not account for the tax deductibility of mortgage interest, which affects the real after-tax cost for itemizers. It also assumes you will not sell the home before the new loan matures — if your plans are uncertain, the break-even timeline is the number to watch most carefully.