Refinance Break-Even Calculator
Refinancing a mortgage usually means paying closing costs up front in exchange for a lower monthly payment. The key question is whether you will stay in the home long enough for the savings to cover those costs — that point is the break-even month. This refinance break-even calculator compares your current and new monthly payments on the same balance, then divides the closing costs by the monthly saving to find how many months it takes to come out ahead. If you sell or refinance again before break-even, the refinance loses money.
Calculate
Default result: 18
Refinance Break-Even Calculator · Materials
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Break-even month
250000 × 6.5 × 25 × 5 × 25 × 4000
Shopping list
- Monthly saving
- $226.54
- Current monthly payment
- $1,688.02
- New monthly payment
- $1,461.48
Est. total
18
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This calculator provides estimates for general informational purposes only and is not financial, investment, tax, or legal advice. Results are projections based on the figures you enter and the stated assumptions, and actual outcomes will differ. Consult a qualified financial professional before making borrowing, saving, or investment decisions.
Reviewed by the calculators.dev team · Last updated 2026-06-24
Formula reviewed against Standard refinance break-even (closing costs ÷ monthly saving) — PMT hand derivation (10-VERIFICATION.md)
How to calculate
Enter your loan balance, your current rate and remaining term, the new rate and term you are offered, and the closing costs. The calculator computes the monthly payment on both the current and the new loan, takes the difference as your monthly saving, and divides the closing costs by that saving. For a $250,000 balance going from 6.5% to 5.0% over 25 years, the payment falls by $226.54 a month and $4,000 in costs breaks even in 18 months. Staying past that point means the refinance saves you money.
Monthly saving = current payment − new payment, where each payment is M = P · i(1 + i)^n / ((1 + i)^n − 1) on the same balance P with that loan's monthly rate i and number of payments n. Break-even month = ceil(closing costs ÷ monthly saving). If the new payment is not lower (saving ≤ 0), there is no break-even and refinancing never recoups its cost.
Example calculation
Refinancing a $250,000 balance from 6.5% to 5.0% over 25 years drops the monthly payment from about $1,688.02 to $1,461.48 — a saving of $226.54 a month. With $4,000 in closing costs, it takes 18 months for those savings to recoup the cost. If you plan to keep the home well past month 18, the refinance pays off.
- breakEvenMonth
- 18
- monthlySaving
- $226.54
- currentPayment
- $1,688.02
- newPayment
- $1,461.48
Assumptions
- The comparison is on the monthly payment only; it does not account for extending the term, which can raise total interest even when the payment falls.
- Closing costs are paid up front and not rolled into the loan; rates are fixed for both loans.
- Break-even is measured purely against the monthly saving, ignoring the time value of money and any tax effects.
- With no closing costs to recoup, break-even is reported as month 1 — the savings begin immediately.
Common mistakes
- Refinancing that does not lower the payment. If the new rate or term raises the monthly cost, there is no break-even — the calculator flags this case.
- Resetting the term. Refinancing a 25-year-old loan into a new 30-year loan lowers the payment but can increase total interest paid; compare the schedules, not just the payment.
- Ignoring how long you will stay. If you move before the break-even month, the closing costs outweigh the savings.
Frequently asked questions
What is the break-even point on a refinance?
It is the number of months it takes for the lower monthly payment to add up to the closing costs you paid to refinance. After that month, the refinance is saving you money.
Is refinancing worth it?
It usually is if you will keep the loan well beyond the break-even month and the new term does not balloon your total interest. Compare both the break-even and the total interest before deciding.
What if the new payment is higher?
Then there is no break-even from monthly savings alone, and the calculator flags it. People sometimes still refinance to shorten the term or switch loan types, but it will not pay for itself through a lower payment.
Does this include the time value of money?
No. It compares the raw closing costs to the raw monthly savings. A more conservative analysis would discount future savings, which would push the break-even slightly later.