Refinance Break-Even Calculator and Savings
Calculate refinance break-even months and savings in USD
Refinance break-even FAQs
Does rolling closing costs into the loan change break-even?
Yes. When you roll closing costs into the new mortgage, the balance and payment both increase. Your monthly savings compared with the old loan are usually smaller, so it often takes more months for the savings to catch up with the costs you financed.
Should I match my remaining term when I refinance?
Matching the remaining term keeps the comparison simple because you are looking at similar payoff timelines. Resetting to a longer term can lower the payment but may increase total interest. A shorter term typically raises the payment but can cut interest dramatically if it still fits your budget.
Are taxes, insurance, or escrow included in this calculator?
No. This tool focuses on principal and interest only. Property taxes, homeowner’s insurance, and other escrow items vary by lender and location, so they are best reviewed directly on your loan estimate and closing disclosure.
Is this refinance calculator financial advice?
This page is an educational planner. It simplifies the math so you can estimate payments, interest, and break-even timing. It is not personalized financial, legal, or tax advice. Always review full loan estimates and talk with a qualified professional before making refinance decisions.
Refinance break-even calculator: quick guide
This refinance break-even calculator estimates how many months it takes for a lower rate to recover closing costs. Enter the remaining balance, your current APR, and the months left on the loan, then test a new APR and term. The tool computes the new monthly payment, the monthly savings versus your existing payment, and the break-even month where cumulative savings first exceed the costs you paid at closing. You can model costs paid in cash or rolled into the new loan, which slightly reduces savings because you also finance those costs.
1. Use realistic current-loan numbers
To keep results realistic, start with the values on your latest statement. The remaining balance should match your current principal, and the current APR should be the actual annual percentage rate on the mortgage you hold today. For the “months remaining” field, use the scheduled payments left on your amortization or account summary. These inputs define the baseline payment and interest if you do not refinance.
2. Enter the refinance terms and closing costs
For the refinance scenario, enter the new APR from your quote and a term you could realistically qualify for, such as 30, 25, 20, or 15 years. Closing costs include lender fees, third-party charges, and any points you choose to pay. If you pick “pay in cash,” costs are treated as an upfront out-of-pocket expense. If you choose to roll costs into the loan, the calculator adds them to the new balance, which slightly increases the payment and changes the break-even timing.
3. Choose a time horizon and optional discount rate
The time horizon field lets you limit the comparison to the years you expect to keep the refinance. If you might move, sell, or refinance again in 60 months, enter 60 so the calculator focuses on those months instead of the full term. The optional discount rate estimates the present value of savings when cash today is more valuable to you than cash later. A higher discount rate shrinks the present value of long-term savings and can make refis with very long payback periods look less attractive.
4. Read the break-even and savings summary
The summary highlights your break-even point, current and refinanced payments, monthly savings, and how much interest you might save over your chosen horizon. If you pay costs in cash, break-even is the number of months needed for cumulative savings to exceed those costs. If you roll costs into the loan, the tool still shows roughly how many months of savings it takes to offset the financed amount. You will also see whether total interest over the horizon is lower or higher after refinancing.
5. Use the calculator as a planning tool, not a final quote
Treat the output as a planning estimate. Real lenders may calculate interest using slightly different day-count conventions, may require mortgage insurance, or may change escrows over time. If your break-even is close to the date you expect to move or your monthly savings are very small, it may be safer to keep your existing loan. When the break-even month is well before your move date and interest savings are substantial, a refinance can be a powerful way to lower lifetime borrowing costs while still fitting your budget.
How the refinance break-even math is approximated
Monthly principal-and-interest payment for a fixed-rate mortgage is computed using the standard annuity
formula. Let L be the loan amount in USD, a the annual
percentage rate as a decimal (for example, 0.061 for 6.1%), and n the number of
monthly payments. The monthly rate is r = a / 12. The payment is
PMT = L·r·(1+r)^n / ((1+r)^n − 1) when r > 0, and simply L ÷ n when the rate is zero.
The calculator builds amortization-style projections for both “keep loan” and “refinance” scenarios. In each
month, interest is balance × r, and the rest of the payment reduces principal.
Break-even in months is approximated as ceil(costs / (PMT_old − PMT_new)) when the refinanced
payment is lower and you pay costs out of pocket. When costs are rolled into the new loan, the model shows
how many months of savings it takes to offset the financed amount.
To compare interest over a horizon H, the tool sums monthly interest from the first
H payments in each scenario, or until the loan is paid off if that happens earlier. Optional NPV uses a
yearly discount rate d converted to a monthly rate d/12 and sums each month’s payment
difference as savings_t / (1+d/12)^t, then subtracts upfront costs. As with any financial
model, results are rounded to two decimal places and should be treated as approximations rather than exact
lender quotations.