The refinance break-even point is your closing costs divided by your monthly savings: that is how many months it takes for the lower payment to pay back what the refinance cost. Enter your balance, current rate, new rate and costs to see the new payment, the break-even month and the lifetime cost compared with keeping your mortgage. check whether buying points pays off · see the new loan's schedule · compare extra payments instead.
Current loan and new offer
Does it pay off?
Break-even
2 years 3 months
Monthly savings
$249.36
New payment (P&I)
$1,908.72
Balance-adjusted break-even
2 years 2 months
counts equity, not just payments
Lifetime cost difference
$31,477
Estimates for planning, not a loan offer or financial advice. Every rate and cost here is a number you enter or an example you can change; confirm figures with your lender.
How the break-even is calculated
The classic refinance test divides the cash you pay at closing by the amount the payment drops each month:
If you expect to keep the home and the loan longer than that, the refinance recovers its cost. The calculator reports that figure, plus two checks the simple formula misses.
Balance-adjusted break-even
A new 30-year loan pays down principal more slowly at first than a loan you are already years into. So the calculator also tracks, month by month, the total you have paid plus what you still owe under each option, and reports the first month the refinance comes out ahead. That month is usually later than the simple break-even when the term is restarted.
Lifetime cost
It adds up every remaining payment on the current loan and every payment on the new loan plus up-front costs. A positive number means the refinance costs less in total if you keep it to the end.
Worked example
A $310,000 balance at 7.25% with 28 years left has a principal-and-interest payment of $2,158.09. Refinancing into a new 30-year loan at 6.25% with $6,500 of closing costs drops it to $1,908.72, saving $249.36 a month, so the simple break-even is 2 years 3 months. Keeping the term at 28 years instead gives a payment of $1,956.04, a break-even of 2 years 9 months and a lifetime saving of $61,388, compared with $31,477 when the term restarts at 30 years.
What else to weigh
How long you will stay. Selling or refinancing again before the break-even month means the costs were not recovered.
Points. Paying points lowers the rate but adds to closing costs; test them with the points calculator.
Cash-out. Taking cash out raises the new balance; enter the new loan amount as the balance to see the true payment.
PMI. A refinance with 20% equity can drop PMI; one with less equity may add it back.
Rules of thumb such as "refinance when rates fall 1%" are shortcuts for this same calculation; the 1% guide explains why the break-even matters more than the size of the drop. If you are not refinancing, extra principal is the other way to cut interest: see the early payoff calculator.
Frequently asked questions
Is a refinance worth it if I might move?
Only if you keep the new loan past the break-even month. For example, $6,000 of closing costs and $200 a month of savings break even after 30 months; sell or refinance again before then and the refinance lost money.
How do you calculate the break-even point on a refinance?
Divide the closing costs you pay up front by the monthly payment savings. If a refinance costs $6,000 and lowers the payment by $250, it breaks even after 24 months. The calculator also shows a stricter break-even that counts how fast each loan's balance falls.
Why does a lower payment not always mean I save money?
Restarting a 30-year term spreads the balance over more months, which lowers the payment but can raise the total interest you pay. Compare the lifetime cost line, or set the new term to the months left on your current loan.
Should I roll closing costs into the new loan?
Rolling costs in means no cash at closing, so the payment break-even is immediate, but you borrow more and pay interest on the costs. Tick the box to compare both ways.
What closing costs should I enter?
Use the total from the lender's Loan Estimate: origination and lender fees, appraisal, title, recording and any points. Prepaid interest, taxes and insurance are not true costs of refinancing, because you would pay them anyway.