Refinance Break-Even Calculator
Find out whether refinancing your mortgage actually saves you money. Enter your current loan and the new offer, and see your new payment, monthly savings, and how many months it takes for the savings to cover your closing costs.
Your new monthly payment
How It Works
Refinancing replaces your current mortgage with a new loan, usually to get a lower interest rate. The trade-off is that refinancing is not free: lenders charge closing costs, typically 2% to 5% of the loan amount. This calculator compares your current monthly payment with the new one using the standard amortization formula, M = P × r(1+r)n / ((1+r)n − 1), where P is your loan balance, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments left. The difference between the two payments is your monthly saving.
The key number is the break-even point: closing costs divided by monthly savings. That tells you how many months you need to keep the new loan before the savings have paid back what refinancing cost. If you sell the home or refinance again before that point, you lose money on the deal. If you stay well past it, every extra month is pure saving.
Worked example: you owe $250,000 with 25 years left at 7.5%, and you refinance into a new 25-year loan at 6% with $5,000 in closing costs. Your current payment is about $1,847.48 a month. The new payment is about $1,610.75 a month, saving you $236.72 every month. Divide the $5,000 closing costs by $236.72 and you break even in about 22 months. Over the full 25 years you would pay roughly $71,017 less in interest.
Watch out for one trap: refinancing into a longer term can lower your monthly payment while costing you more interest overall, because you pay interest for more years. Compare the total interest figures below, not just the monthly payment, before deciding.
Frequently Asked Questions
What is a good break-even point for refinancing?
As a rule of thumb, breaking even within 24 months is a strong result, and most homeowners aim to break even well before they expect to move. If the break-even point is longer than the time you plan to stay in the home, refinancing usually does not pay off.
How much lower should the new rate be to make refinancing worth it?
There is no fixed rule, but a drop of 0.75 to 1 percentage point is often enough to beat typical closing costs within a couple of years. On a large balance, even a 0.5 point drop can be worth it, because the monthly saving is bigger.
Does this calculator include taxes and insurance?
No. The figures cover principal and interest only. Property taxes, homeowners insurance and PMI are usually paid through the same monthly escrow payment, but they do not change when you refinance, so they do not affect the savings comparison.
What if I refinance into a shorter term, like 15 years?
A shorter term usually raises your monthly payment but slashes total interest, because you pay the loan off faster and short-term rates are often lower. Enter the shorter term above and compare the total interest rows to see the trade-off.
Can I roll closing costs into the new loan?
Yes, many lenders offer "no-closing-cost" refinances that fold the fees into the balance or charge a slightly higher rate instead. That removes the upfront cost but raises your payment, so the break-even math changes. If you roll costs in, add them to the loan balance and set closing costs to zero here.
Last updated: November 2026