Refinance Break-Even Calculator
See whether refinancing is worth it and when you break even.
Payments left on the current loan.
Up-front cash to refinance.
You save over the loan's life
- Break-even
- 14 mo
- Monthly savings
- $300.07
- New monthly payment
- $1,419.47
- Current monthly payment
- $1,719.54
- Interest on new loan
- $261,011.50
- Interest on current loan
- $307,128.21
Lifetime savings compares each loan's full cost over its term, including closing costs on the new loan.
How the refinance calculator works
The calculator values two loans on the same outstanding balance and compares them. Both loans use the standard amortization formula M = P*r / (1 - (1+r)^-n), where P is the current balance, r is the monthly rate (annual rate divided by 12), and n is the number of months. Your current loan is valued over its remaining months at your existing rate. The new loan is valued over its new term at the new rate.
From there the logic is direct. Monthly savings is the old payment minus the new payment. Break-even months is ceil(closing costs / monthly savings): the rounding up means you only break even once a whole month of savings has covered the costs. If the new payment is not lower than the old one, monthly savings are zero or negative and the tool reports that the refinance never breaks even. Interest totals come from each loan’s real cent-rounded payment schedule, not from a shortcut, so the figures match what a lender would actually charge.
Worked example
Suppose you owe 250,000 at 6.5% with 300 months left, and you refinance into a new loan at 5.5% over 300 months, paying 4,000 in closing costs.
| Quantity | Value |
|---|---|
| Old monthly payment | 1,688.02 |
| New monthly payment | 1,535.22 |
| Monthly savings | 152.80 |
| Break-even | 4,000 / 152.80 = 26.18, rounded up to 27 months |
| Old total interest | 256,404.68 |
| New total interest | 210,565.12 |
| Lifetime savings | 41,839.56 |
You recoup the 4,000 after 27 months of lower payments. Because the term stayed at 300 months, the lower rate also cuts total interest, so the lifetime saving is large.
How to use it
- Enter your current rate and months remaining, not the original loan terms. The math depends on where the loan is today.
- Get a real closing cost figure from a Loan Estimate. Guessing low makes break-even look better than it is.
- Compare break-even months against how long you will realistically keep the loan or the house.
- Watch lifetime savings when the new term is longer than the old one: a lower payment can still cost more in total interest.
- Try a shorter new term too. A 20-year refinance of a 25-year balance often saves more over the life of the loan than a 30-year one.
Limitations
This is an estimate, not professional advice. It compares level fixed payments and does not model adjustable rates, points bought to lower the rate, escrow for taxes and insurance, private mortgage insurance, prepayment penalties on the old loan, or the time value of money. It also assumes closing costs are paid in cash rather than financed. Use it to decide whether refinancing is worth a closer look, then confirm the exact numbers with your lender’s Loan Estimate before committing.
Frequently asked questions
Should I refinance if I plan to move in two years?
Compare the break-even months this tool reports against how long you will keep the loan. If break-even is 27 months but you sell in 24, you pay the closing costs and move before the lower payment has recouped them. In that case the refinance loses money even though the monthly payment is lower.
Why does the calculator say I never break even?
Break-even only exists when the new monthly payment is lower than the old one. If the new rate or term produces a payment that is equal to or higher than your current payment, monthly savings are zero or negative, so closing costs are never recouped from payment savings. The tool flags this instead of returning a misleading number.
Does this include closing costs that I roll into the new loan?
No. The calculator treats closing costs as cash paid up front, not financed. They are added to the new loan's total cost for the lifetime comparison but are not added to the new principal. If your lender rolls costs into the balance, the real monthly payment and interest will be slightly higher than shown.
Can monthly savings be positive but lifetime savings negative?
Yes. Lowering your rate but extending the term can cut the monthly payment while increasing total interest paid over the life of the loan. The break-even months answer 'when do I recoup closing costs,' and lifetime savings answer 'do I pay less overall.' Read both before deciding.
What rate should I enter for the current loan?
Enter the rate on your existing note and the months remaining, not the original term. The tool values your current loan over its remaining balance and remaining months so the comparison reflects where you actually are today, not where you started.