Mortgage Refinance Break-Even Calculator

Enter your current loan, the new rate you have been quoted, and your estimated closing costs. The calculator shows your new payment, how many months it takes to break even, and how much interest you save over the life of the loan.

Quick answer: a refinance pays for itself once your monthly savings have added up to the closing costs you paid. That is your break-even point. Most homeowners break even somewhere between 20 and 40 months. If you plan to stay in the home past that point, refinancing usually makes sense. Run your own numbers below.

How the math works

Every fully amortizing mortgage uses the same payment formula. For a balance P, a monthly rate r (the annual rate divided by 12) and a term of n months, the principal-and-interest payment is:

payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

The tool runs that formula twice: once for your current loan over its remaining months, and once for the new loan over its new term. The difference between the two payments is your monthly savings. Dividing your closing costs by that monthly savings gives the break-even point in months. To estimate lifetime interest, the tool multiplies each payment by its number of months and subtracts the balance, then compares the two totals and nets out the closing costs you pay up front.

Worked example

Say you owe $280,000 at 6.9% with 27 years left, and you can refinance to 5.8% on a fresh 30-year loan for $6,000 in closing costs:

In this example the lower rate more than offsets the longer term, but that is not always true. Stretching a loan that had 23 years left back out to 30 years can raise total interest even when the rate falls. The lifetime-interest line in the calculator is there to catch exactly that trap, which is why it is worth checking before you sign.

When refinancing is worth it

The honest answer is "it depends on how long you stay." If you sell or move before the break-even month, you spent more on closing costs than you got back in payment savings. Past that point, the savings are yours to keep. Compare your break-even result against how long you realistically expect to own the home, and read the step-by-step refinance guide for the full checklist. If you are weighing a shorter term against a lower payment, see 15-year vs 30-year refinance.

Frequently asked questions

What is the break-even point on a mortgage refinance?

It is the number of months it takes for your monthly payment savings to add up to the closing costs you paid. Divide total closing costs by monthly savings: $4,000 in costs and $200 a month saved means a 20-month break-even.

How much does it cost to refinance a mortgage?

Closing costs usually run about 2% to 6% of the loan amount, covering lender fees, the appraisal, title work and recording. On a $300,000 loan that is roughly $6,000 to $18,000. Get a Loan Estimate from more than one lender and compare them line by line.

Is it worth refinancing for a 1% lower rate?

Sometimes. The old "1% rule" is a rough guide, not a law. What matters is your break-even point and how long you will keep the home. A 1% cut on a large balance saves far more than the same cut on a small one.

Does refinancing reset my loan term?

Usually, yes. A new 30-year loan restarts the amortization clock, which lowers the payment but can raise total interest. Refinancing into a shorter term, or simply continuing to pay the old amount, avoids that.