Mortgage Refinance Break-Even Calculator
Refinancing your mortgage can lower your monthly payment, reduce your interest rate, or shorten your loan term, but it always involves upfront closing costs. The break-even analysis answers the key question: how long must you keep the new loan before the monthly savings exceed what you paid to refinance? If you plan to sell or refinance again before the break-even point, refinancing is unlikely to be financially beneficial. This calculator computes your new monthly payment, monthly savings, and break-even month.
Refinance break-even formula
Old Payment = Balance * r(old)(1+r(old))^n(old) / ((1+r(old))^n(old) - 1)
New Payment = Balance * r(new)(1+r(new))^n(new) / ((1+r(new))^n(new) - 1)
Monthly Savings = Old Payment - New Payment
Break-Even Months = Closing Costs / Monthly Savings
Where r(old) and r(new) are the respective monthly interest rates and n(old) and n(new) are the remaining and new term in months. If monthly savings are zero or negative, refinancing does not reduce your payment.
When refinancing makes sense
- You plan to stay in the home past the break-even month.
- The new rate is meaningfully lower than your current rate (typically 0.75%+ for large loans).
- You want to shorten your term and pay less total interest, even if the monthly payment rises.
- You want to eliminate PMI if your home has appreciated enough to bring LTV below 80%.
- Closing costs are as low as possible; compare Loan Estimates from multiple lenders.
Mortgage refinance: frequently asked questions
What is the refinance break-even point?
The break-even point is the number of months you must keep the new mortgage before your cumulative monthly savings exceed the upfront closing costs. Break-Even Months = Closing Costs / Monthly Payment Savings.
What is included in refinance closing costs?
Typical refinance closing costs include: origination fee (0.5% to 1% of loan), appraisal ($300 to $600), title search and insurance, government recording fees, and prepaid items (escrow prepaids). Total costs typically run 2% to 5% of the loan amount.
Should I roll closing costs into the loan?
Rolling closing costs into the loan avoids upfront cash but increases the loan balance, which raises the monthly payment and total interest. The break-even calculation changes: compare the new payment (higher principal) vs old payment (higher rate) instead of comparing to zero closing costs.
Does resetting the loan term affect the break-even analysis?
Yes. Refinancing from, say, a 25-year-remaining loan into a new 30-year loan lowers the monthly payment but extends the payoff date and increases total interest. A shorter refinance term (15 or 20 years) raises the monthly payment but saves more total interest. Compare total lifetime costs for the full picture.
What rate reduction justifies refinancing?
A common rule of thumb is to refinance when the new rate is at least 0.75 to 1 percentage point below your current rate, but the break-even calculation is more precise. The benefit depends on your loan balance, remaining term, and how long you plan to stay in the home.
Official sources
- Consumer Financial Protection Bureau: Refinancing Your Mortgage.
- Freddie Mac: Refinancing.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.