Refinance Break-Even Calculator
Is it worth refinancing? Calculate the break-even point in months. Determine if monthly savings outweigh closing costs.
Last reviewed
A refinance break-even period is the point where accumulated monthly payment savings equal the upfront closing costs of the new loan. It's calculated as Break-Even Months = Closing Costs ÷ (Old Payment − New Payment), the moment refinancing turns from a cost into a gain.
Recoup Period
11.7Months
Monthly Cash Gain
$557
Total Savings
$131,798
Current Loan Data
Your current loan works out to about 7.94%.
New Loan Terms
Refi Rule of Thumb
If your break-even period is longer than you plan to keep the home (typically 5-7 years), the refinance is mathematically a net loss.
Recovery Trajectory
Capital Recoupment Curve
Rate Sensitivity
| Rate | New Payment | Monthly Saving | Break-Even |
|---|---|---|---|
| 6.000% | $2,098 | +$502 | 13.0 Months |
| 5.750%(yours) | $2,043 | +$557 | 11.7 Months |
| 5.500% | $1,987 | +$613 | 10.6 Months |
| 5.250% | $1,933 | +$667 | 9.7 Months |
How to Use This Calculator
Enter your current loan balance and the principal-and-interest payment you're making on it today, and how many years are left on it, then enter the terms of the new loan you're considering: its rate, term, and closing costs. Check "Roll costs into loan principal" if you plan to finance the closing costs rather than pay them out of pocket - the calculator treats that case differently, since there's no cash outlay to recoup.
This tool compares undiscounted dollar totals: the sum of your monthly payment savings against the fees you paid to get them. It does not calculate a Net Present Value or account for the time value of money - if that distinction matters for your decision, a fee-only financial planner can build a discounted cash-flow comparison for your specific numbers.
The Break-Even Formula
A Worked Example
Using this calculator's default numbers: a $350,000 balance with a $2,600/mo payment, refinanced into a 30-year loan at 5.75% with $6,500 in closing costs (paid out of pocket, not rolled in). The new principal-and-interest payment is $2,042.50/mo, a savings of $557.50/mo. Dividing the $6,500 in fees by that monthly savings gives a break-even point of 11.7 months.
For the total, the calculator compares everything left to pay on each path. The current loan has 28 years left: $2,600 × 336 = $873,600. The new loan runs 30 years: $2,042.50 × 360 + $6,500 comes to about $741,802. The refinance saves about $131,798. Multiplying the $557.50 monthly saving by 360 months would give $194,198, which overstates the gain, because two of those 30 years are payments you would not have made on the old loan at all. Choosing a shorter new term raises the monthly payment but can still save more in total, which this comparison shows and a monthly-savings shortcut does not.
Capital Liquidity vs. Long-Term Savings
When you roll closing costs into the loan instead, you pay nothing out of pocket today, so there's no cash outlay to recoup - but your loan balance is larger, which shrinks the monthly savings you'd otherwise get from the lower rate. You're trading a smaller monthly gain now for not having to write a check at closing.
Assumptions and Limitations
This calculator assumes a standard fixed-rate loan with no rate changes, and it doesn't account for private mortgage insurance, property taxes, homeowners insurance, or how long you actually plan to stay in the home - a refinance that breaks even in 12 months is a poor trade if you sell in 10. It also doesn't model the tax deductibility of mortgage interest or points. For the current national average rate, check Freddie Mac's Primary Mortgage Market Survey, updated weekly.
Refi Inquiries
?What is the 'Break-Even' point in a mortgage refinance?
The break-even point is the specific month where your accumulated monthly payment savings exactly equal the upfront closing costs paid for the new loan. If you sell or refinance again before this point, you lose money.
?Is it worth refinancing for a 0.5% lower rate?
In high-balance environments (loans > $300k), a 0.5% drop can often save hundreds per month. However, it depends on the closing costs. If costs are $6,000 and you save $200/mo, your break-even is 30 months.
?Should I roll closing costs into the loan balance?
Rolling costs into the loan ('No-Cash-Out') preserves your liquidity but increases your principal. You will pay interest on those fees for the next 30 years, which can significantly reduce your true long-term savings.
About this calculator. Results are estimates for education and planning, based on the inputs you enter and the published formula described above. Everything runs in your browser; nothing you type is sent to us or stored. It is not financial, tax, legal or medical advice. Read the disclaimer and our methodology.
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