Refinance Break-Even Calculator
Find out how many months it takes for a lower mortgage payment to pay back your closing costs, and whether refinancing saves money over the life of the loan.
Principal and interest only. Totals include upfront closing costs. Taxes and insurance are not included.
How the break-even point is calculated
Refinancing costs money upfront, and the lower payment pays that money back a little each month. The break-even point is the month when your total savings catch up with your closing costs. If you sell or refinance again before then, you lose money on the deal.
This calculator also compares every payment left on your current loan with every payment on the new loan, plus closing costs paid upfront. That lifetime view catches refinances that lower your payment but cost more in the end.
Worked example: 7.25% down to 6.25%
Say you owe $250,000 at 7.25% with 27 years left. A lender offers a new 30-year loan at 6.25%, with $6,000 in closing costs paid at closing.
- Current payment, 27 years at 7.25%$1,760.48
- New payment, 30 years at 6.25%$1,539.29
- Monthly savings$221.19
- Break-even: $6,000 ÷ $221.1928 months
If you plan to stay in the home for more than about two and a half years, this refinance pays for itself. Over the full loan, you would pay about $10,252 less than if you kept your current mortgage.
Watch out for the longer-term trap
Part of the savings in the example comes from the lower rate, and part comes from stretching the loan from 27 years back to 30. A longer term lowers the payment, but you make three more years of payments.
Keep the same 27 years left instead, and the new payment is $1,599.20. Your monthly savings drop to $161.28 and break-even moves to 38 months. But the lifetime savings jump to about $46,255, because you are not adding extra years of interest. Try the “Years left” option in the calculator to compare.
Break-even months at a glance
Months to recover closing costs at different monthly savings, rounded up to the next full month.
| Closing costs | Save $100/mo | Save $200/mo | Save $300/mo |
|---|---|---|---|
| $3,000 | 30 | 15 | 10 |
| $5,000 | 50 | 25 | 17 |
| $7,500 | 75 | 38 | 25 |
| $10,000 | 100 | 50 | 34 |
Frequently asked questions
What is a good break-even point?
Any break-even point that comes well before you expect to sell or refinance again. If you plan to move in three years, a 28-month break-even works. A 50-month break-even does not.
How much should rates drop before I refinance?
There is no fixed rule. A smaller rate drop can still make sense on a large balance with low closing costs, while a bigger drop may not help on a small balance. Run your own numbers instead of relying on a rule of thumb.
What is a no-closing-cost refinance?
The lender covers your closing costs, usually in exchange for a higher interest rate, or adds them to your loan balance. You pay nothing at closing, so break-even is immediate, but you may pay more interest over time.
Does refinancing hurt my credit score?
Usually only a little and for a short time. The lender’s credit check and the new account can lower your score slightly. Shopping several lenders within a short window generally counts as a single inquiry for scoring purposes.
Can I deduct points I pay to refinance?
Generally, points paid to refinance are deducted gradually over the life of the new loan rather than all in the first year, if you itemize. Check IRS Publication 936 or ask a tax professional.
This calculator is for educational purposes only and is not financial, tax or legal advice. Actual rates, fees and loan terms depend on your lender and your situation.