Refinance Break-Even Calculator
A refinance only saves money once your lower payments have repaid the closing costs. This finds that break-even month — and whether you'll stay in the home long enough to reach it.
Break-even point
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Enter your details and calculate.
Break-even = closing costs ÷ monthly savings. If you plan to sell or refinance again before this point, the refinance loses money. Watch the term: resetting to a new 30 years lowers the payment but can raise lifetime interest.
What "break-even" really means
Refinancing replaces your current mortgage with a new one, ideally at a lower rate. But it isn't free — closing costs typically run a few thousand dollars. The refinance only starts saving you money once your reduced monthly payments have added up to more than those upfront costs. That tipping point is the break-even month.
If your closing costs are $8,000 and you save $320 a month, you break even in 25 months — just over two years. Stay in the home past that, and every month afterward is pure savings. Leave before it, and the refinance cost you money.
The trap most refinance ads hide
A lower monthly payment isn't automatically a better deal. If you've been paying a 30-year loan for a few years and refinance into a fresh 30-year term, you reset the clock. The monthly payment drops partly because of the lower rate and partly because you've stretched the remaining balance back out over 30 years. That can mean paying more total interest over the life of the loan even while your monthly payment falls.
To avoid this, compare not just payments but the term. Refinancing a loan with 28 years left into a new 15- or 20-year term often saves dramatically more interest, even if the monthly payment doesn't fall as much. Match the new term to how long you realistically expect to keep the loan.
When refinancing makes sense
- The rate drop is meaningful and you'll stay past the break-even point.
- You can refinance into a shorter term without straining your budget.
- You're switching out of an adjustable-rate or FHA loan into a fixed conventional loan.
It makes less sense if you'll move soon, if closing costs are high relative to the savings, or if you're deep into a low-rate loan you'd be giving up.
Frequently asked questions
Should I roll closing costs into the loan?
You can, which avoids paying cash upfront, but it increases your balance and slightly raises your payment and total interest. The break-even logic still applies; just use your real net savings.
Is a "no-closing-cost" refinance really free?
No. The lender covers the costs in exchange for a higher rate or a larger balance. It can still make sense if you'll move before a points-based refinance would break even.
How big a rate drop do I need?
There's no fixed rule — it depends on your balance and closing costs. The break-even month is the honest test: if it's comfortably shorter than how long you'll keep the loan, the refinance is worth considering.