Mortgage Refinance Break-Even Calculator
Find out how long it takes to recoup your refinancing closing costs through lower monthly payments.
Know when refinancing makes financial sense.
Should You Refinance Your Mortgage? Refinancing replaces your current mortgage with a new one — usually to lower your interest rate and reduce monthly payments. The trade-off: you pay closing costs upfront, so you need to stay in the home long enough to recoup them.
Break-Even Formula Break-even (months) = Total Closing Costs ÷ Monthly Payment Savings
If you plan to stay longer than the break-even period, refinancing makes financial sense. If you plan to move sooner, you will lose money on the refi.
Example Current payment: $1,850/month New payment: $1,650/month Monthly savings: $200 Closing costs: $4,500 Break-even: $4,500 ÷ $200 = 22.5 months (about 1 year 11 months)
After 22.5 months, every payment saves you $200. Over a 20-year remaining loan, total savings would be nearly $48,000 — minus the $4,500 upfront = $43,500 net.
What Counts as Closing Costs? Origination fees, appraisal, title search, title insurance, attorney fees, recording fees, prepaid interest, and escrow setup. Typical closing costs range from 2% to 5% of the loan amount.
Important Considerations
- Resetting your loan term can cost more interest even if monthly payments drop
- Cash-out refis increase your loan balance and total interest paid
- A lower rate does not always mean a better deal — check total interest over the life of the loan
- Always consult a mortgage professional before refinancing