Refinance Break-Even Calculator
Find how long a lower payment takes to repay what the refinance costs.
Result
Break-even: 15 months
A longer new term can lower the payment while raising total interest, so compare the interest figures too. Costs rolled into the balance are not modelled.
- New monthly payment
- $1,380.51
- Monthly saving
- $419.49
- Total interest on the new loan
- $246,982.96
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Results are arithmetic estimates based on the values you enter. Rates, fees and terms are set by your lender or provider, and your actual agreement controls what you pay or receive. Confirm important figures with them or with a qualified adviser. Read the full disclaimer
How to use the Refinance Break-Even Calculator
- Enter what you owe now and your current principal-and-interest payment, without tax or insurance.
- Enter the rate and term you have been offered.
- Enter the closing costs, including points, appraisal and origination.
Break-even is a division, not a judgement
A refinance costs money now and saves money monthly. The break-even is simply how many months of saving it takes to get the money back.
monthly saving = current payment − new paymentbreak-even months = closing costs ÷ monthly savingIf the new payment is not lower there is no break-even at all, and the calculator says so rather than showing an enormous number. That case is real: refinancing into a higher rate to shorten a term, or to take cash out, can raise the payment deliberately.
The payment and the total cost are different questions
Lowering a payment by restarting a thirty-year term is easy, and it usually raises what the loan costs in total. Someone twenty-two years into a mortgage who refinances into a new thirty-year loan has added eight years of interest, however much the monthly figure improved.
This is why the total interest on the new loan is shown beside the break-even instead of being hidden. To compare fairly, either keep the remaining term roughly the same, or plan to keep paying the old amount on the new loan and let it clear early.
Costs rolled into the balance are still costs
Lenders frequently offer to add closing costs to the loan rather than collect them at signing. That makes the refinance feel free and it is not: the balance is larger, and the costs now accrue interest for the whole term. Enter them as closing costs here whichever way they are paid.
A no-cost refinance usually means a higher rate instead. Run it both ways and compare the total interest.
What this does not model
It does not model an adjustable rate after its fixed period, mortgage insurance that starts or ends because the loan-to-value changed, the tax treatment of points, or a cash-out that increases the balance. It also assumes both loans run to term.
If you intend to pay extra on the new loan, the payoff calculator will show what that does; the break-even here assumes the scheduled payment and nothing more.
With your numbers
- Monthly saving = $1,800.00 − $1,380.51 = $419.49
- Break-even = $6,000.00 ÷ $419.49 = 15 months
- Total interest on the new loan = $246,982.96
Quick reference
A longer new term can lower the payment while raising total interest, so compare the interest figures too. Costs rolled into the balance are not modelled.
| Example | Break-even |
|---|---|
| USD 250,000 from 1,800 to 5.25% over 30 years | 15 |
| USD 250,000 refinanced into a 15-year loan | |
| USD 320,000 with low closing costs | 6 |
| USD 180,000 with a small rate drop | 29 |
| USD 200,000 where the rate has risen | |
| EUR 210,000 from 1,400 to 3.4% over 25 years | 10 |
| EUR 150,000 from 1,050 to 3.9% over 20 years | 19 |
| EUR 300,000 from 1,900 to 3.75% over 30 years | 9 |
Common questions about the Refinance Break-Even Calculator
- Why does the payment fall but the total interest rise?
- A refinance usually restarts the term. Twenty-two years left on the old loan replaced by a new thirty-year loan lowers the payment while adding eight years of interest. Compare both numbers, not just the payment.
- What counts as closing costs?
- Origination and application fees, appraisal, title work, recording fees and any discount points paid to buy the rate down. If the lender rolls them into the balance you still pay them, with interest.
- What if I move before the break-even?
- Then the refinance loses money. The break-even month is the point at which accumulated savings equal what you spent, so selling or refinancing again before it means the costs were never recovered.
- Is a break-even under two years always good?
- It is a strong signal, but it only measures the payment. A shorter break-even on a loan that adds ten years of term can still cost more overall.