Refinance Break-Even Calculator
Work out how many months it takes for monthly payment savings to repay refinance closing costs, with a $4,500 example and the term-reset caveat.
Results · USD
Months to break even
Monthly savings
- Years to break even
- 1.50
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Educational estimates · not financial advice · free, no signup
How this was calculated
Months = closing costs / (current payment − new payment).
Want more detail? Full formula notes & FAQs ↓
Detailed guide
What it is, how to use it, how to read the numbers, common mistakes, a worked example, formulas, and FAQs.
What this calculator is
A refinance replaces your mortgage with a new one, usually at a lower rate, but it costs money up front in closing costs. The break-even point is how long it takes for the lower monthly payment to repay those costs. If you plan to stay in the home longer than that, the refinance should pay for itself; if you move or refinance again sooner, it will not. This calculator divides closing costs by your monthly payment saving. It is simple by design and has limits: it does not consider that a new 30-year loan resets your term, that costs may be rolled into the balance, or the interest you pay over the long run. Use it as a first screening test, then compare total interest.
When to use / who it helps
- You are offered a lower rate and want to know if the costs are worth it.
- You are comparing lenders with different closing costs.
- You are deciding how long you must keep the home to benefit.
- You are comparing a no-cost refinance with one that has fees.
- You are checking a broker's claims.
How to use
Steps
- Enter your current monthly payment.
- Enter the new monthly payment from the quote.
- Enter total closing costs and fees.
- Read the months and years to break even.
- Compare with how long you expect to stay.
- Also compare total interest over each loan's remaining life.
How to interpret results
- Break-even is the time to recover costs from savings.
- A shorter break-even is better.
- If the new payment is not lower, there is no break-even.
- Resetting to a longer term can cut the payment but raise total interest.
- Staying beyond break-even yields net savings in payment terms.
Common mistakes & gotchas
- Comparing payments only, without looking at total interest.
- Forgetting to include all fees.
- Ignoring that the new term may be longer.
- Counting savings after you sell.
- Using principal-and-interest for one loan and total payment with escrow for the other.
Worked example
Worked example — payment $2,100 to $1,850 with $4,500 of costs
- Monthly savings: 2,100 − 1,850 = $250.
- Months to break even: 4,500 ÷ 250 = 18 months.
- In years: 18 ÷ 12 = 1.5.
- With $6,000 of costs and $200 savings, break-even would be 30 months.
Result: The refinance pays back its costs in 18 months, or 1.5 years.
To load the form's own demo values, tap Try example above the Calculate button.
How to calculate / formula
Months = closing costs / (current payment − new payment).
Frequently asked questions
What is the break-even point?
The month when cumulative savings equal the refinance costs.
How long should I stay for a refinance to pay off?
At least as long as the break-even period, and ideally well beyond it.
Does this include interest over the full term?
No. Compare total interest separately.
What are typical closing costs?
They vary by lender and loan; get a Loan Estimate for exact fees.
What if costs are rolled into the loan?
The new payment already reflects them, so use the full costs and compare total interest as well.
Is a no-cost refinance really free?
Usually the costs are covered by a higher rate or added to the balance.