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Refinance Break-Even
Compare your current mortgage with a refinance quote: the new payment, how many months until the closing costs pay for themselves, and whether you come out ahead in the years you'll actually stay.
The loan you have
The new loan
No cash at closing, but you borrow the costs too and pay interest on them for the whole term.
What this means
You’d save $221 a month. Divide the $5,000 in closing costs by that and you break even in 1 yr 11 mo, the figure a lender will quote. Count the balance you still owe as well and it takes 2 yr 1 mo, because the new loan pays down more slowly at first.
If you stay 7 yr, you come out about $11,227 ahead, counting every payment, any cash at closing, and what you'd still owe on each loan the day you leave.
These are estimates of principal and interest only. Taxes and insurance are the same bill whichever loan pays them. Compare quotes from more than one lender, line by line on each Loan Estimate, before choosing.
Build on it
These are estimates to help you think, not personalized legal, tax, or investment advice, and not a promise of any result.
You have a mortgage, and someone has quoted you a lower rate. This calculator puts the loan you have next to the one you've been offered: the two payments, how many months it takes for the monthly saving to pay back the closing costs, and where you'd stand on the day you expect to sell or move.
Why it matters: a refinance costs real money up front, and it only pays if you stay long enough to earn that back. A lower payment is also not the same thing as a cheaper loan. Starting a fresh 30-year loan on a balance that only had 25 years left can lower the payment and still cost more in total, because you pay interest for longer.
How to use it
Start with the loan you have
Today's balance from your statement, your current rate, and the years left on it. Use principal and interest only. Escrow for taxes and insurance is the same bill whichever loan pays it, so it cancels out.
Enter the quote, not the ad
The rate, term and closing costs from your Loan Estimate, with points and fees included. If you'd rather not pay the costs in cash, tick the box to roll them into the new loan and see what borrowing them costs you.
Be honest about how long you'll stay
This is the number that decides it. The calculator shows two break-evens: the quick one a lender quotes (closing costs divided by the monthly saving) and a full one that also counts the balance you still owe. Then it tells you whether you're ahead or behind on the day you leave.
Behind the numbers
Why there are two break-evens
The quick version divides closing costs by the monthly saving. It ignores the term. When a new loan runs longer than what you had left, it pays the balance down more slowly at first, so after a few years you owe more than you would have on the old loan. Counting that balance gives a later, more honest break-even.
Resetting the clock
Refinancing 25 years left into a new 30-year loan adds five years of payments. The lower payment comes partly from the lower rate and partly from spreading the balance over more months. If total cost matters to you, try a 20- or 15-year term, or keep paying your old payment amount on the new loan.
Rolling in the closing costs
Adding the costs to the loan means no cash at closing, but you borrow that money and pay interest on it for the whole term. The monthly saving shrinks a little, and break-even moves out.
The math behind it
Each loan's payment comes from the standard amortization formula: balance times the monthly rate, divided by one minus (one plus the monthly rate) to the power of minus the number of months. The monthly saving is the old payment minus the new one. The quick break-even is closing costs divided by that saving. The full break-even adds, for each loan, everything paid so far plus what is still owed, and finds the first month the new loan comes out lower.
Worked example
$250,000 left at 7% with 27 years to go is $1,719.54 a month. Refinanced into a 30-year loan at 6% it is $1,498.88: $220.66 a month less. $5,000 in closing costs divided by $220.66 is 22.7, so the quick break-even is 23 months. Counting the slower paydown on the longer loan, the full break-even is 25 months. Stay seven years and you come out about $11,200 ahead.
Costs ÷ saving, then add a cushion
Divide the closing costs by the monthly saving for a first answer in months. If the new loan is longer than what you have left, add a few months to that for the slower paydown, and only refinance if you expect to stay well past it.
Common questions
How do I calculate my refinance break-even point?
The quick way: divide your total closing costs by how much the new payment saves you each month. $5,000 in costs and $220 a month saved is about 23 months. The fuller way also counts the balance you still owe on each loan, which matters when the new loan runs longer than the old one. This calculator shows both.
Is it worth refinancing for a 1% lower rate?
It depends less on the rate gap than on two other numbers: the closing costs and how long you'll stay. A one-point drop on a large balance can pay back in two years; on a small balance with high costs it can take much longer. Put your own numbers in and compare the break-even to your plans.
Can a lower payment cost me more?
Yes. If the new loan is longer than what you have left, you pay interest for more years. The calculator's whole-loan line adds up every payment left on each loan plus any cash at closing, so you can see when a lower payment is a more expensive loan.
Should I roll closing costs into the loan?
It keeps cash in your pocket today, which can matter if your emergency fund is thin. The cost is interest on the borrowed costs for the life of the loan. Tick the box in the calculator and compare the break-even and the whole-loan total both ways.
Go deeper
The calculator gives you a number. The Home Ownership & Real Estate Brick teaches you what to do with it, in plain English. And if you’re not sure where to start, the free BrickScore Assessment checks your whole foundation in about 5 minutes.
first the number, then the move