Refinance Break-Even Calculator
Refinancing a mortgage can lower your monthly payment, but it is not free: you pay closing costs to put the new loan in place. The break-even point tells you how long it takes for the monthly savings to repay those costs, which is the single most useful number when you are deciding whether a refinance is worth it. This calculator takes your current loan balance, your current monthly payment, the new interest rate, the new term and the closing costs. It works out the new monthly payment from the balance, rate and term using the standard amortization formula, subtracts it from your current payment to find the monthly saving, then divides the closing costs by that saving to give the break-even point in months, rounded up to a whole month. If you expect to keep the loan past the break-even point, refinancing generally pays off; if you might move or refinance again before then, it may not. Enter your own figures from your Loan Estimate to test the trade-off. The Consumer Financial Protection Bureau recommends comparing the total cost over the time you plan to keep the loan, and the worked example below reconciles exactly to the calculator.
Refinance break-even is closing costs / monthly saving. Refinancing a $300,000 balance from 1,896.20 to $1,703.37 a month saves $192.83, recovering $4,000 of costs in 21 months.
Refinance break-even formula
New payment M = P * r * (1 + r)^n / ((1 + r)^n - 1)
P = loan balance, r = new rate / 100 / 12, n = new years * 12
Monthly saving = current payment - new payment
Break-even months = closing costs / monthly saving, rounded up
If saving is zero or negative, there is no break-even point
The new monthly payment comes from the standard amortization formula applied to the loan balance, the new rate and the new term. The monthly saving is what you stop paying each month. Dividing the closing costs by that saving gives the number of months of savings needed to recover the cost; rounding up gives a whole month.
Worked example
A 300,000 balance refinanced at 5.5% over 30 years, replacing a current payment of 1,896.20, with 4,000 in closing costs.
- New rate = 5.5 / 100 / 12 = 0.00458333; n = 30 * 12 = 360
- New monthly payment M = 1,703.37
- Monthly saving = 1,896.20 - 1,703.37 = 192.83
- Break-even = 4,000 / 192.83 = 20.74 months
- Rounded up = 21 months
At a 192.83 monthly saving, the 4,000 cost is recovered after 21 months, so keeping the loan longer than that makes the refinance worthwhile. These are the calculator's default inputs, so the results above match the widget.
Break-even at common cost levels
How the break-even point shifts with closing costs, at the default 192.83 monthly saving.
| Closing costs | Monthly saving | Break-even (months) | Break-even (years) |
|---|---|---|---|
| 2,000 | 192.83 | 11 | 0.9 |
| 4,000 | 192.83 | 21 | 1.8 |
| 6,000 | 192.83 | 32 | 2.7 |
| 8,000 | 192.83 | 42 | 3.5 |
Guidance on refinancing costs and comparing offers: US Consumer Financial Protection Bureau, Owning a Home.
Refinance break-even calculator: frequently asked questions
What is the refinance break-even point?
The break-even point is the number of months it takes for your monthly savings from a lower payment to add up to the closing costs you paid to refinance. Divide the closing costs by the monthly saving and round up. If you plan to keep the loan past that point, refinancing tends to pay off; if you may sell or refinance again sooner, it may not.
How are refinance closing costs estimated?
Refinancing usually carries the same kinds of costs as the original mortgage: lender origination fees, an appraisal, title services, recording fees and points if you buy down the rate. The Consumer Financial Protection Bureau notes these commonly run a few percent of the loan amount. Use your Loan Estimate for the exact figure, then enter it here as the closing costs input.
Does a lower rate always mean refinancing is worth it?
No. A lower rate cuts the payment, but the closing costs must be recovered first. If you extend the term, you may pay more total interest even at a lower rate. The break-even test, comparing the saving against the up-front cost over your expected holding period, is the right way to judge whether the refinance is worthwhile.
What if the new payment is higher than the current one?
If the new monthly payment is the same or higher, there is no monthly saving, so a simple break-even point does not exist and this calculator says so. People still sometimes refinance to a shorter term or to switch loan types, but those decisions turn on total interest and goals rather than a monthly saving, so weigh them separately.
Should I roll closing costs into the new loan?
You can, but adding costs to the balance means you borrow more and pay interest on them, which lengthens the true break-even. To compare fairly, enter the full closing costs here whether you pay them up front or finance them. The Consumer Financial Protection Bureau recommends comparing the total cost over the time you expect to keep the loan.
Official sources
- Refinancing, closing costs and comparing loan offers: US Consumer Financial Protection Bureau, Owning a Home. As at 24 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 24 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.