Mortgage Refinance Break-Even Calculator

What is a refinance break-even?

When you refinance you pay closing costs up front — lender fees, title insurance, appraisal, points, sometimes 1.5–3% of the loan. In exchange you get a lower monthly payment. The break-even point is the number of months of savings you need before the cumulative reduction equals what you paid up front. Below break-even you’re still in the red on the deal; above it every dollar saved is pure win. The classic rule of thumb is a 1% rate drop and at least two years before you sell, but the actual math depends on your remaining balance, the term you choose and the closing costs your lender quotes. This calculator does the full math so you can compare any two scenarios in seconds.

How to use the calculator

1. Enter your current balance — the principal still owed today, not the original loan amount.
2. Enter your current rate and how many remaining months are left on the loan.
3. Enter the new rate and new term being offered.
4. Enter the closing costs from the lender’s loan estimate (around 2–3% of the loan).
5. Compare break-even months to how long you plan to stay. If you’ll move sooner, refinancing rarely pays off.

How the math works

Each monthly payment uses standard amortization: M = P × r(1+r)^n / ((1+r)^n − 1). Break-even months is closing costs divided by monthly savings. Lifetime savings totals every payment over each loan’s lifespan and subtracts the closing fee.

Break-even (months) = Closing Costs / Monthly Savings

Lifetime Savings = (Old Payment × Old Months) − (New Payment × New Months) − Closing Costs

Typical break-even by rate drop

Approximate values for a $300K, 30-year mortgage with $5,000 closing costs.

Real numbers depend on your balance and the closing costs your lender quotes.

Frequently asked questions