Mortgage Refinance Calculator
Estimates the break-even timeline on a mortgage refinance — the number of months of payment savings needed to recoup your closing costs — by comparing your current and new amortized monthly payments. Use it when rates drop or your credit improves.
Last updated: May 2026
About this calculator
Refinancing replaces your existing mortgage with a new loan, ideally at a lower rate. The monthly payment for each loan is calculated with the standard amortization formula, where P is the loan balance, r is the monthly interest rate (annual rate ÷ 12), and n is the number of remaining monthly payments. Monthly savings equal the old payment minus the new payment. This calculator returns the break-even point — total closing costs divided by those monthly savings — in months: Break-Even = closingCosts / (oldPayment − newPayment). If you plan to stay in the home beyond the break-even, refinancing is financially beneficial; the longer you hold the loan afterward, the greater your total lifetime savings. (If the new rate is not lower than the current rate there are no monthly savings and the refinance never breaks even.)
How to use
Assume a $300,000 balance, current rate 6.5%, new rate 5%, 25 years remaining, and $5,000 in closing costs. The current amortized payment works out to about $2,026/month and the new payment to about $1,754/month, so monthly savings ≈ $272. Break-even = $5,000 / $272 ≈ 18.4 months. If you expect to keep the home past roughly 19 months, the refinance pays for itself; after that point the monthly savings are pure benefit.
Frequently asked questions
When does it make financial sense to refinance a mortgage?
Refinancing typically makes sense when you can secure a rate at least 0.5–1 percentage point lower than your current rate and you plan to remain in the home long enough to recover closing costs through monthly savings. The break-even period — closing costs divided by monthly savings — is the key threshold. If you're likely to sell or refinance again before reaching break-even, the upfront costs outweigh the benefit. Other strong reasons to refinance include switching from an adjustable to a fixed rate, removing mortgage insurance, or shortening the loan term.
How do closing costs affect the break-even point on a refinance?
Closing costs typically range from 2–5% of the loan amount and directly delay the point at which refinancing becomes profitable. Higher closing costs push the break-even further into the future, meaning you need to stay in the home longer to come out ahead. Rolling closing costs into the new loan reduces upfront cash outlay but increases your balance and monthly payment, subtly eroding savings. Negotiating lender fees or choosing a no-closing-cost refinance (which carries a slightly higher rate) can shorten the break-even timeline for borrowers who don't plan to stay long.
What happens to my remaining loan term when I refinance?
Unless you specifically choose a shorter term, refinancing resets your amortization schedule and can extend the total repayment period. For example, refinancing 25 remaining years into a new 30-year loan reduces monthly payments but means you pay interest for an additional five years — significantly increasing lifetime interest costs. To avoid this, many borrowers refinance into a 15- or 20-year term, or make extra principal payments on the new loan. Running a full amortization comparison, not just a monthly payment comparison, gives a complete picture of total cost.