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Refinance break-even calculator

How many months of lower payments does it take to earn back what the refinance costs? Enter three numbers.

Principal and interest
You break even in 24 months (2 yr). By year 6 you're $10,800 ahead.
Monthly saving
$225
Break-even
24months
Net after 6 years
$10,800

This is the simple method. For a refinance that also changes the term, the full refinance calculator adds the balance difference.

Break-even is where the line crosses zero

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$5,000 ÷ $180 = 28 months. Keep the loan longer than that and the refinance pays; sell or refinance sooner and it costs you. Double the costs and the crossing moves twice as far out.

How break-even works

A refinance buys you a lower payment with money up front. The upfront cost is a hole; each month's saving fills it a little. The month the hole is full is the break-even point.

Break-even months = total costs ÷ monthly saving.

Two things push it out: higher costs and smaller savings. Negotiating a lender credit, skipping points or shopping title insurance pulls it in. The Consumer Financial Protection Bureau suggests comparing Loan Estimates from several lenders for exactly this reason.

Where the simple formula misleads

If the new term is longer, part of your "saving" is just paying the debt off more slowly. You still owe more at every point than you would have. That's why the full calculator measures net position, including balances. See what counts as a closing cost.

Questions people ask

How do you calculate refinance break-even?
Divide the total cost of refinancing by the amount you save each month. $5,400 in costs ÷ $225 saved per month = 24 months. After month 24, every payment puts you ahead.
What is a good break-even period?
Any break-even that arrives comfortably before you expect to sell, pay off or refinance again. Many lenders and housing counsellors treat under about two to three years as strong, but the only benchmark that matters is your own time horizon.
Should I include the higher balance from rolled-in costs?
Yes. If costs are rolled into the loan you pay nothing today, but the monthly saving is smaller and you owe more. Use the full refinance calculator, which tracks balances on both loans to give the true break-even.
Does break-even account for a longer term?
The simple formula does not. If the new loan runs longer than what you have left, you will be paying longer. The simple break-even can look great while the lifetime cost goes up; check the lifetime figure too.
What costs count toward break-even?
Everything you pay to get the new loan: origination and underwriting fees, discount points, appraisal, title insurance and settlement fees, recording taxes. Prepaid interest and escrow deposits are not true costs of refinancing (you would pay them anyway), so most analysts leave them out.

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