Refinance Break-Even Calculator

A refinance break-even calculator answers one question: how long until the savings from a new loan repay what it cost to get it? This tool shows that month, plus two checks that the simple math misses: your net savings over the years you will actually keep the loan, and how your total lifetime interest changes.

How to use this calculator

Pull your current loan details from your latest mortgage statement, then enter one refinance offer at a time.

• Balance, rate and years left. Use today’s balance, not the original loan amount.
• New rate and term. Copy these from a Loan Estimate if you have one. Otherwise, use an example rate.
• Closing costs. Enter the total you would pay, including any points. Freddie Mac says refinancing typically costs 3% to 6% of the loan principal.
• Years you’ll keep it. This drives the verdict. Be honest about moving or refinancing again.

Run the tool once for each offer and each term you are considering. Comparing a 30-year and a shorter term side by side often changes the answer.

How it is calculated

Both payments use the standard loan formula: M = P × r(1+r)^n / ((1+r)^n − 1), where P is the balance, r is the monthly rate (annual rate ÷ 12) and n is the number of monthly payments.

1. Current payment = M using your current rate and years left.
2. New payment = M using the new rate and new term.
3. Monthly savings = current payment − new payment.
4. Break-even month = closing costs ÷ monthly savings, rounded up.
5. Net savings = (current payments over your time frame + balance left) − (new payments + closing costs + balance left).
6. Lifetime interest change = total interest on the new loan − interest left on the current loan.

The verdict is “likely worth it” when net savings are positive. The tool covers principal and interest only. It assumes closing costs are paid in cash, both loans are fixed-rate, and no prepayment penalty applies.

Worked example

Keeping the same example, the table shows what happens with different new terms. Net savings are over 7 years and include the lower balance a shorter loan leaves behind.

Time frame matters too. With the 30-year option, keeping the loan only 2 years gives net savings of about −$1,597, so the verdict flips to “likely not worth it.”

What your result means

If your break-even month comes well before you expect to move or refinance again, the refinance likely pays off. Freddie Mac gives a simple test: if you may move in two years but need three years to recoup costs, it probably doesn’t make sense.

Look past the payment, too. Freddie Mac warns that refinancing into a new 30-year loan when you have 20 years left extends your term and can mean more total interest. The lifetime interest line shows that trade-off.

Rules that can change your answer:

• Right to cancel. On many refinances of your main home you have three business days to cancel. The CFPB explains the rules and exceptions.
• VA streamline. VA’s IRRRL lets you add costs to the loan or take a higher rate so the lender pays them. VA also tells borrowers to divide costs by monthly savings.
• Prepayment penalty. If your current loan has one, add it to closing costs. The CFPB says these usually apply when you pay off the loan within three or five years.
• Points. Points raise costs now for a lower rate. The IRS says refinance points are generally deducted over the life of the loan, if you itemize.

Common mistakes

• Comparing only the monthly payment and ignoring years added to the loan.
• Leaving points, appraisal or title fees out of closing costs.
• Using the original loan amount instead of today’s balance.
• Assuming you’ll stay “forever” when a move is likely within a few years.
• Treating a “no-cost” refinance as free. Freddie Mac says the cost is usually in a higher rate or a bigger loan.

Related guides and tools

Read when to refinance your mortgage for the full decision, what happens at closing for the signing day, and should you buy mortgage points before paying for a lower rate.

Need cash from your equity? Try the cash-out refinance vs HELOC calculator. Weighing a shorter loan? Use the 15 vs 30 year mortgage calculator or test points with the mortgage points calculator.