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Refinance Break-Even Calculator

How long a refinance takes to pay back its closing costs — and whether the lower payment is actually costing you money.

Enter what you owe now and what the new loan would look like.

Your loan today

Current balance

What you still owe, not what you originally borrowed.

Current rate

Years left

The new loan

New rate

New loan term

Closing costs

From the lender's Loan Estimate. It varies by thousands between lenders.

Roll the closing costs into the loan

Nothing due at closing, but they accrue interest for the whole term.

Estimate. A real-world figure based on the assumptions listed below, which you can change.

How this calculator works

The number everyone quotes is closing costs divided by the monthly saving. Save $300 a month against $6,000 of costs and you break even in twenty months. It is easy, it is widely repeated, and on its own it is close to useless.

The problem is that a lower payment is not the same as a cheaper loan. Refinancing eight years into a thirty-year mortgage back into a fresh thirty-year term drops the payment — and puts you thirty-eight years into paying for the house. The payment fell because the debt was stretched, not because the borrowing got cheaper.

So this compares the current loan properly: the balance you have left, over the years you have left, at your current rate. That is what keeping the loan costs from today. Both paths are then amortised to the end, so the lifetime figure is a real comparison rather than a payment against a payment.

The result is that the fastest break-even is often the worst deal, and the calculator shows both numbers side by side so it is impossible to miss.

The formula

Exactly what happens to your numbers, step by step.

The break-even everyone quotes
```
months = closing costs ÷ monthly saving
```
Only meaningful alongside the lifetime figure below.
What keeping the loan costs
```
current payment = remaining balance amortised over the remaining term
```
Not the payment on the original loan — that comparison flatters every refinance.

What it really saves

lifetime = interest on the old loan − interest on the new loan − closing costs

A worked example

Eight years into a 30-year mortgage: $260,000 left at 7%, 22 years to run, $6,000 of closing costs.

What you enter

Current balance: $260,000
Current rate: 7%
Years left: 22
Closing costs: $6,000

The working

Keeping the loan costs: $1,933 a month
New 30-year at 6%: $1,559 — saves $374/mo, breaks even in 16 months
…but over its life: costs $56,893 more
New 22-year at 5.5%: $1,700 — saves $233/mo, breaks even in 26 months
…and over its life: saves $55,484
New 15-year at 5.5%: $2,124 — costs $192/mo more, never breaks even
…and over its life: saves $121,891

The fastest break-even is the worst deal by $178,000

Ranked by break-even, the 30-year wins at sixteen months. Ranked by what it actually costs, it is last by a wide margin — and the option with no break-even at all saves the most. If you only look at the monthly payment, you will pick exactly the wrong one.

Assumptions

Every result here rests on these. Change your inputs and the result changes with them.

Both loans are fixed-rate, and both are held to the end of their term.
The current payment is derived from the balance and time remaining, not from the original loan.
Closing costs are paid at closing, or financed into the new balance if you choose that.
Interest accrues monthly at the annual rate divided by twelve.
No prepayment penalty on the existing loan, and no extra payments on either.

What this cannot tell you

It assumes you keep the new loan for its full term. Most people do not — if you sell or refinance again in five years, only the break-even matters and the lifetime figure never happens.
Tax is not modelled. Mortgage interest may be deductible depending on your situation, which changes the after-tax comparison.
Escrow, insurance and property tax are excluded. This is principal and interest only.
Cash-out refinances are not modelled. Taking equity out changes the balance and the whole comparison with it.
It cannot know your closing costs. Get a Loan Estimate — lenders are required to provide one, and the figure varies by thousands between them.

Questions people ask

How do I calculate the break-even on a refinance?

Divide the closing costs by the amount your monthly payment falls. $6,000 of costs against a $300 monthly saving is twenty months. But check the lifetime figure before acting on it — a long new term can produce a fast break-even and still cost tens of thousands more.

Is a lower monthly payment always better?

No, and this is the most expensive misunderstanding in refinancing. Stretching the remaining balance over a longer term lowers the payment by adding years of interest. In the example above, the option that saves the most each month costs $56,893 more overall.

How much does the rate need to drop to be worth it?

The old rule of thumb was one percent, and it was never reliable. What matters is your balance, how long you have left, and the closing costs — on a large balance a quarter point can be worth it, and on a small one two points may not be. Run your own numbers.

Should I roll the closing costs into the loan?

It means nothing is due at closing, which is genuinely useful if cash is tight. But financed costs accrue interest for the whole term, so you pay considerably more than the sticker price for them. Both options are here — compare the lifetime figures.

What if I plan to move in a few years?

Then the break-even month is the number that matters and the lifetime figure is irrelevant, because you will never reach it. If you will sell before breaking even, the refinance loses money no matter how good the rate looks.

Sources and review

The default figures here are typical published values, not fixed constants — densities, coverage rates and rules of thumb vary by product and by supplier. Every one of them is an input you can replace, and the figure on your supplier’s quote or the manufacturer’s data sheet beats any default. The assumptions and limitations above set out exactly what this rests on.

Methodology version 1.0.0 · Last reviewed September 10, 2026