Refinance Break-Even Calculator

A clear win: same term, lower rate

Refinance a fictional $300,000 balance with 25 yr left at 7.5% into a 25 yr loan at 5.75% with $6,000 in closing costs, and the payment falls from $2,216.97 to $1,887.32 — $329.65 a month. The costs are recouped in about 1 yr 7 mo, and because the term did not stretch, lifetime interest drops too: $365,092 left on the old path versus $266,196 on the new loan — $98,896 less interest before counting the costs. Both figures come from the same tested engine as the calculator above, computed when this page is built; the rates and amounts are illustrative inputs chosen for the arithmetic, not quotes.

The headline figures are one subtraction and one division. The monthly saving is $2,216.97 − $1,887.32 = $329.65. The break-even is $6,000 ÷ $329.65 = 18.2 months. The engine returns that exact quotient; the result box rounds it up to the first whole month by the end of which the accumulated saving equals or exceeds the costs. After 18 lower payments the saving totals $5,933.78, short of $6,000; after 19 it is $6,263.43, so the page shows 1 yr 7 mo. Nothing is rounded between steps; money is rounded only on screen.

What the engine computes, step by step

The form hands your six inputs and the roll-in toggle to one engine function, which validates them, runs the steps below in order, and returns a typed result — or an explicit, human-readable error if an input cannot be used. The interface only formats what comes back; it never does arithmetic of its own.

1. Validation. The balance must be greater than zero, rates cannot be negative, closing costs may be zero but not negative, and both terms must be whole numbers of months. A fractional term is refused with the engine's own message: "Enter the remaining term as a whole number of months."
2. Current payment. The standard amortized-loan (PMT) formula with monthly compounding — the convention behind US mortgages and most consumer loans — on the balance, the current rate ÷ 12, and the remaining months: $2,216.97 in Example A.
3. Amount refinanced. The balance alone, or the balance plus the closing costs when the roll-in toggle is on. In Example A that is $300,000 in cash and $306,000 rolled in.
4. New payment. The same formula on the amount refinanced, the new rate ÷ 12, and the new term in months: $1,887.32.
5. Monthly saving. Current payment − new payment. It can be zero or negative.
6. Break-even. The closing costs you entered ÷ the monthly saving. When the saving is not positive the engine returns no break-even: there are no savings to recoup with.
7. Interest left on the current loan. Current payment × remaining months − balance: $2,216.97 × 300 − $300,000 = $365,092. It counts forward from the balance you typed; interest already paid never enters the engine.
8. Interest over the new loan. New payment × new term − amount refinanced: $266,196 in Example A.
9. Lifetime interest. New interest − interest left. Positive means the refinance pays more lifetime interest; negative, less. Closing costs are not subtracted here — they enter this line only when they are rolled into the amount refinanced.

Terms are counted in months

The engine takes both terms as whole numbers of months, and the form builds each one from a years field and a months field (0–11). Example C: a fictional $280,000 balance at 7% with 22 years and 7 months left — 271 months — refinanced at 6.1% over the same 271 months with $4,500 in costs. The payment falls from $2,059.04 to $1,905.57, a saving of $153.47 a month; break-even is 29.3 months, shown as 2 yr 6 mo; and lifetime interest is $41,590 lower.

The extra months matter because the current payment is priced from them. Enter 22 years and leave the months blank, and the engine sees 264 months instead: the current payment becomes $2,081.59 rather than $2,059.04, the saving $176.01, break-even 2 yr 2 mo, and the interest left on the current path $269,539 rather than $278,000 — $8,461 of interest the comparison no longer counts. The engine prices whatever months you enter.

The term-reset trap: a lower payment that costs more

Now the honest case. Take a fictional $250,000 balance at 6.5% with just 15 yr left and refinance into a fresh 30 yr loan at 5.9% with $5,000 in costs. The payment plunges from $2,177.77 to $1,482.84 — $694.93 a month, with break-even in only 8 mo. It looks unbeatable. But the current path had $141,998 of interest left, while the new 30-year loan accrues $283,823 — $141,825 MORE lifetime interest, because the clock restarted and the debt lingers for 15 extra years. The lower payment is real; so is the higher total cost. This calculator always shows both so you can decide which matters for your situation.

Setting the new term equal to the remaining term isolates the rate. The same offer over 15 yr gives a payment of $2,096.16, a saving of $81.61 a month, a break-even of 5 yr 2 mo, and $14,690 less lifetime interest. Same balance, same two rates, same costs; only the term changed, and the saving shrank, the break-even lengthened, and the lifetime line changed sign. The payment is the debt spread over the months you choose; the interest is what accrues over those months.

Rolling the closing costs into the loan

With the toggle on, the amount refinanced becomes the balance plus the closing costs — $300,000 + $6,000 = $306,000 in Example A — and the new payment is priced on that larger amount: $1,925.07 instead of $1,887.32, $37.75 a month more. The saving shrinks to $291.91, and because the engine still divides the entered closing costs by the saving, the break-even quotient stretches from 18.2 to 20.6 months — 1 yr 9 mo once rounded up. Interest over the new term is computed on the financed amount, so it rises from $266,196 to $271,520, and the lifetime line narrows from $98,896 less to $93,572 less. The result box labels the payment "New payment (costs financed)" and adds a "New loan amount" line so the larger principal is visible.

When the new payment is not lower

Example D: a fictional $200,000 balance at 5% with 20 yr left, offered 6.5% over the same 20 yr with $3,000 in costs. The current payment is $1,319.91 and the new payment $1,491.15, so the headline reads $171.23 higher per month. The engine returns no break-even rather than dividing by a negative saving, and the result box prints the reason: never — the new payment is not lower, so there are no savings to recoup. The lifetime line still computes: $116,779 left on the current path against $157,875 over the new loan, $41,096 more. Every line pointing against the offer is a valid output, not an error.

How to read the result

• The headline is the monthly saving — "$329.65 lower per month" in Example A — or, when the new payment is higher, the difference marked "higher per month".
• Current payment and New payment are the two PMT figures, principal and interest only. With the toggle on, the second is labelled "New payment (costs financed)" and a New loan amount line shows the balance plus the costs.
• Break-even on closing costs is the quotient rounded up to whole months — 1 yr 7 mo in Example A. It reads "immediately (no closing costs)" when the costs are zero, and "never" when there is no saving.
• Interest left on current loan, Interest over new loan term and their difference, Lifetime interest, are shown to whole dollars as large totals; the last is labelled "MORE" or "less" and is stated before closing costs unless the costs were rolled in.
• Copy result places a one-line summary — the saving, the break-even, and the lifetime figure — on your clipboard. Your lender's figure may differ by a few cents depending on their rounding and day-count conventions — the difference is presentational, not an error.

How to use the numbers

Break-even answers one question: how long must you keep the loan for the refinance to beat doing nothing on a cash basis. If you might sell or refinance again before break-even, the deal loses money regardless of the rate. The lifetime-interest line answers the other question: what the loan costs if you keep it to the end. To isolate the rate effect, set the new term equal to your remaining term. To model the full payment picture with taxes and insurance, use the Mortgage Calculator; for a quick same-term comparison at whole-year terms, the Refinance Calculator is the shorter path.

What the comparison leaves out

• Only principal and interest. The engine takes a balance, two rates, two terms and a closing-cost figure. Property tax, insurance, PMI and HOA are not in the comparison; on the Mortgage Calculator they are estimates from the rates and amounts you enter.
• Fixed-rate, fully amortizing loans only. As the methodology page states, the calculators do not model adjustable-rate mortgages, interest-only periods, balloon payments, or negative amortization. Whatever rate you enter is held fixed for every month of both loans.
• Your figures, not quotes. Costs are lender- and deal-specific and rate quotes are lender-specific; the engine computes from the figures entered and has no other source for them. There is no separate field for any individual fee — whatever belongs in the comparison goes into the single closing-cost figure you type.
• No calendar and no holding period. Break-even counts payments from the first one on the new loan, money is not discounted, and how long the loan will be kept is not an input.
• The engine's range. Terms beyond its limit are refused with its own message — "Terms are limited to 60 years (720 months)." — and a correct calculation can still be the wrong calculation for your situation: choosing the right loan for a real-world decision is judgment we cannot automate.

Frequently asked questions

Not financial advice: a general educational estimate. Actual rates, costs, and eligibility are lender-specific — get written Loan Estimates before deciding. Values are processed locally in your browser and never transmitted. See the methodology page.