Refinance Break-Even Calculator
Find out exactly when your refinance savings start to pay off.
How This Tool Works
This calculator determines the Break-Even Point of a mortgage refinance—the exact month where your interest savings finally exceed the upfront costs of the new loan.
- Formula:
Closing Costs / Monthly Savings = Months to Break-Even. - Logic: We calculate your new monthly payment and subtract it from your current payment to find your "Monthly Savings." We then see how many of those savings it takes to "pay back" the upfront fees.
- Assumptions: We assume closing costs are paid upfront in cash. If you roll them into the loan, the math changes as you'll be paying interest on those fees.
How to Use (Steps)
- Enter Current Payment: Your current monthly Principal and Interest (P&I) payment.
- Enter New Loan Details: The amount, interest rate, and term length of the proposed loan.
- Enter Closing Costs: The total fees (origination, appraisal, title, etc.) for the refinance.
- Analyze: Review the months-to-break-even. If you plan to move before this date, the refinance is a net loss.
Example Calculation
Scenario: Dropping your rate by 1%.
• Current Payment: $2,500.
• New Payment: $2,200 (Savings = $300/mo).
• Closing Costs: $6,000.
• Break-Even: $6,000 / $300 = 20
Months.
• Verdict: If you stay for 2+ years, you win. If you sell in 1 year, you lose $2,400.
Why This Tool Is Accurate
Lenders often focus only on the lower monthly payment. This tool forces you to look at the "Payback Period," which is the only reliable way to know if a refinance is a sound investment or a marketing trap.
Limitations & Disclaimer
This tool only considers monthly cash flow. It does not account for the "lost equity" if you reset your 30-year clock after already being several years into your current loan. Always compare the Total Interest Remaining on both loans.
Frequently Asked Questions
It depends on your balance. On a $500k loan, a 0.5% drop saves enough to cover $5k in closing costs quickly. On a $50k loan, it might take decades to break even. Always calculate the specific months for your situation.
Rolling costs in feels free because you pay nothing upfront, but it increases your loan balance and monthly payment. Your "break-even" technically happens later because your savings are lower and you're paying interest on the fees.
Your monthly payment will likely increase, meaning you have "negative savings" in this calculator. However, you will save massive amounts of interest and build equity faster. This tool is best for comparing 30yr to 30yr or 15yr to 15yr.