Mortgage Refinance Break-Even Calculator
Finds how many years it takes for your monthly savings from a lower refinance rate to fully offset your closing costs. Use this before deciding whether to refinance your mortgage.
About this calculator
When you refinance, you pay upfront closing costs in exchange for a lower monthly payment going forward. The break-even point is the moment your accumulated monthly savings equal those costs. First, both the old and new monthly payments are calculated using the standard amortization formula: M = B × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where B is your remaining loan balance, r is the monthly interest rate, and n is the remaining number of payments. The monthly savings is M_old − M_new. Annual savings = monthly savings × 12. Break-even (in years) = refinanceCosts / annualSavings. If the break-even period is longer than you plan to stay in the home, refinancing is likely not worth it.
How to use
You have a $250,000 balance at 7.0% with 25 years remaining and can refinance to 6.0% for $4,000 in costs. Old payment: r₁ = 0.07/12 = 0.005833, M₁ = $250,000 × [0.005833 × (1.005833)³⁰⁰] / [(1.005833)³⁰⁰ − 1] ≈ $1,767. New payment: r₂ = 0.06/12 = 0.005, M₂ ≈ $1,611. Monthly savings = $156. Annual savings = $156 × 12 = $1,872. Break-even = $4,000 / $1,872 ≈ 2.1 years. If you stay longer than 2.1 years, refinancing saves you money.
Frequently asked questions
How do I calculate the break-even point on a mortgage refinance?
The break-even point is calculated by dividing your total refinance closing costs by your annual payment savings. Annual savings equals the difference between your old and new monthly payments multiplied by 12. For example, $5,000 in closing costs divided by $1,200 in annual savings yields a 4.2-year break-even. If you plan to sell or pay off the loan before that point, the refinance does not pay off financially.
What costs should I include when calculating refinance break-even?
You should include all closing costs: origination fees, appraisal, title insurance, attorney fees, recording fees, and any prepaid interest or escrow top-ups. These typically total 2–5% of the loan amount. Some lenders offer 'no-cost' refinances that roll fees into the rate or balance — in that case, use the higher monthly payment as your starting point. Excluding any of these costs will make the break-even appear shorter than it truly is.
When is refinancing a mortgage not worth the cost even if rates are lower?
Refinancing may not be worthwhile if you are close to paying off your mortgage, since most of your current payment is already principal rather than interest. It also fails to pay off if you plan to move within the break-even window. Resetting a 25-year remaining term back to 30 years can lower your payment but cost far more in total interest over time. Always compare total interest paid under both scenarios, not just the monthly savings figure.