How is the break-even point calculated?

The break-even point is calculated by dividing total closing costs (including fees, percentage-based costs, and any discount points) by the monthly payment savings. For example, if closing costs are $6,000 and you save $150/month, you break even in 40 months.

When does refinancing make sense?

Refinancing generally makes sense when the new interest rate is meaningfully lower (at least 0.5–1%), you plan to keep the loan long enough to reach the break-even point, and your closing costs are reasonable. If you're close to paying off your loan, refinancing rarely helps because you've already paid most of the interest.

What are typical refinance closing costs?

Refinance closing costs typically run 2–5% of the loan amount and include origination fees, appraisal fees, title insurance, and prepaid interest. Some lenders offer "no-closing-cost" refinances that roll the costs into the rate or balance - factor those in when comparing options.

Does refinancing to a longer term save money?

Refinancing to a longer term lowers your monthly payment but usually increases total interest paid over the life of the loan. This calculator shows both the monthly savings and the lifetime interest comparison so you can weigh the trade-offs.

What are discount points?

Discount points are upfront fees paid to the lender to reduce the interest rate. Each point costs 1% of the loan amount. This calculator includes points in the total closing cost calculation for an accurate break-even analysis.

Refinance Calculator - Break-Even & Savings

	Current Loan	New Loan
Monthly Payment	$2,120.34	$1,847.15
Total Interest (full term)	$336,102.00	$364,974.00
Lifetime Interest Savings	-$28,872.00

Current Loan

New Loan

Monthly Payment

$2,120.34

$1,847.15

Total Interest (full term)

$336,102.00

$364,974.00

Lifetime Interest Savings

-$28,872.00

Current vs. new monthly payment
Item	Value
Current payment	$2,120.00
New payment	$1,847.00

Current vs. new monthly payment

Item

Value

Current payment

$2,120.00

New payment

$1,847.00

How to use the refinance calculator

Enter your remaining loan balance, current interest rate, and remaining term. Then enter the proposed new rate, new term, and all closing costs, including flat fees, a percentage of the balance, and any discount points. Finally, enter how many months you plan to keep the loan. The calculator shows your monthly savings, break-even month, and net savings over your hold period instantly.

What is the break-even point?

The break-even point is the number of months it takes for your cumulative monthly savings to equal the total closing costs. Until you reach that month, you are still "in the hole" on the refinance. After that month, every payment is pure savings.

Break-even months = Total closing costs ÷ Monthly savings

For example, if your closing costs total $6,000 and you save $150 per month, you break even after 40 months (about 3 years and 4 months).

Refinancing to a longer vs. shorter term

Refinancing to a longer term (e.g., resetting to 30 years) lowers the monthly payment but extends the time you pay interest, often increasing lifetime interest paid significantly. Refinancing to a shorter term increases the monthly payment but reduces total interest and builds equity faster. This calculator surfaces both monthly savings and lifetime interest comparison so you can weigh the full picture.

When closing costs eat up the savings

If you plan to sell or refinance again before the break-even point, the upfront closing costs will exceed your savings, making the refinance a net loss. As a rule of thumb, refinancing only makes strong financial sense when you will keep the loan for at least 1.5× the break-even period.

Cash-out refinancing

A cash-out refinance replaces your existing mortgage with a larger loan and gives you the difference as cash, useful for home improvements or debt consolidation. Because you’re borrowing more, the break-even period is different from a rate-and-term refi; factor in the additional interest on the extra principal over the life of the loan. Cash-out refis typically carry a slightly higher interest rate and require at least 20% remaining equity after the cash-out.

No-closing-cost refinance

A no-closing-cost refinance eliminates upfront fees by either rolling the costs into the loan balance or accepting a higher interest rate (lender credits). The break-even calculation becomes simpler — there is no upfront cost to recover — but the higher rate or larger balance means you pay more over the life of the loan. This option is best when you plan to sell or refinance again within a few years.