Category
Finance
Refinance Break-Even Calculator
Compare current vs new loan costs and estimate refinance break-even timing
Estimated time
2 min
Enter Refinance Inputs
Compare your current remaining loan versus a new refinance offer and estimate how long it takes to recover closing costs.
Current Loan
$
%
years
New Loan Offer
%
years
One-time fees paid to complete the refinance. These costs are compared against monthly savings to find the break-even month.
$
Refinance Planning Tips
- Break-even months show how long monthly savings take to recover upfront closing costs.
- A lower monthly payment can still cost more overall when the new term is longer.
- Compare total remaining interest on both paths, not only payment size.
Current vs New Loan Comparison
Remaining balance comparison based on entered terms
| Metric | Current Loan | New Loan |
|---|---|---|
| Interest Rate | 0.00% | 0.00% |
| Term | 0 months | 0 months |
| Monthly Payment | $0.00 | $0.00 |
| Total Interest Remaining | $0 | $0 |
| Closing Costs | - | $0 |
| Total Remaining Cost | $0 | $0 |
Break-even
No break-even
Interest Difference
$0
How Refinance Break-Even Is Calculated
The calculator computes current and new monthly principal-and-interest payments on the same remaining balance, then divides closing costs by monthly savings to estimate break-even timing.
Savings = M_current - M_new; Break-even Months = C / Savings
M_current- current monthly principal-and-interest payment
M_new- new monthly principal-and-interest payment after refinance
C- closing costs paid to refinance
Savings- monthly payment reduction (must be positive for break-even)
- Monthly Savings = Current Payment - New Payment.
- Break-even Months = Closing Costs / Monthly Savings when savings are positive.
- Total interest comparison uses remaining interest on each amortized schedule.
- Extending the term can lower monthly payment while increasing lifetime interest.
Term Extension Warning
- If the new term is longer than your remaining term, you may pay interest for more months.
- Lower monthly payments can still produce higher lifetime cost when the payoff timeline is extended.
- Review both break-even timing and total interest before committing to refinance.
Example Scenarios
Lower rate, same term
$280,000 balance, 6.9% with 24 years left to 5.9% for 24 years, $4,500 costs
Break-even can be reached quickly when payment and interest both drop.
Lower rate, longer term reset
$300,000 balance, 20 years left at 6.4% to 5.8% for 30 years, $6,000 costs
Monthly payment falls but total interest can rise because the term is extended.
Minimal rate improvement
$220,000 balance, 5.8% to 5.7%, 18 years left, $5,000 costs
Small payment differences can make break-even too slow or unreachable.
Frequently Asked Questions
What is a good break-even timeline?
Many homeowners target break-even before their expected move date to ensure savings are realized.
Does this include taxes and insurance?
No. It compares principal-and-interest payments and entered closing costs only.
Why can refinancing increase total interest?
If the new term is longer, interest accrues for more months even at a lower rate.
Should I refinance if monthly savings are negative?
Not for payment savings alone. Consider only if there are other goals such as term shortening or fixed-rate stability.
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