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Refinance Break-Even Calculator

Enter the refinance closing costs and your monthly payment savings to get the break-even point.

How it is calculated

break-even months = closing costs / monthly savings, and years = months / 12. Closing costs are the total one-off fees to refinance, and monthly savings is the drop in your monthly payment after refinancing (old payment minus new payment). Both are in the same currency, and the answer is shown with two decimals.

Costs can be zero but not negative, and savings must be above zero; if the new payment is not lower, no result is given. The tool does no interest or time-value maths: it assumes a constant saving each month and does not model a longer loan term, rolled-in costs, escrow changes or tax effects.

Worked example

Closing costs for the refinance are 4,800 and the monthly payment falls from 1,500 to 1,325, a saving of 175 per month. Break-even = 4,800 / 175 = 27.43 months. In years that is 27.43 / 12 = 2.29. If you expect to keep the loan for less than about 27 and a half months, the refinance will not pay for itself.

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Common mistakes

  • Using the interest-rate difference instead of the payment difference: the input is the drop in the monthly payment in money, not in percentage points.
  • Leaving out costs, such as appraisal or title fees, when summing closing costs: a low total makes the break-even look quicker than it is.
  • Counting savings when the new loan has a longer term: the payment may fall only because you are paying for more years, so total interest could rise.
  • Ignoring how long you will stay: a break-even of 27.43 months only matters if you keep the loan beyond it.

About this calculator

Refinancing a mortgage replaces your loan with a new one, usually at a lower rate, but it comes with closing costs — appraisal, title, origination, and lender fees that typically run 2-5% of the loan amount. The break-even point is the simple division closing costs ÷ monthly savings, which tells you how many months of lower payments it takes before the refinance actually starts putting money in your pocket.

Homeowners and mortgage brokers use this number as the single most important sanity check before refinancing: if you plan to sell or refinance again before reaching break-even, the new loan will cost more than it saves. It's especially relevant when rates drop only modestly, since a small monthly savings can push the break-even point out several years.

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