The break-even month, calculated properly — payments plus remaining balance, not closing costs divided by savings.
Your current mortgage
Use the balance from your latest statement — not the original loan amount. Estimates only; your lender's Loan Estimate governs.
% / yr
yrmo
The new loan
% / yr
years
more years
This is the number that decides it. Sell before you break even and the refinance loses money.
Cash-out & extra payments
You break even in
—
—
Show the math
Current
New
Monthly change—
Cash needed at closing—
New loan amount—
Interest saved over the full term—
Net lifetime difference—
Heads up — you're restarting the clock
If you matched your current payoff date instead
Term—
Monthly payment—
Total interest—
Interest saved vs refinancing long—
Keeping your current payment on the new loan
Payment—
Paid off in—
Paid off earlier by—
Interest saved vs the new loan's schedule—
Net position = everything the current loan would cost you by that year (payments + remaining balance) minus everything the refinance would. Positive means you're ahead.
Year
Paid (current)
Paid (new)
Balance (new)
Net position
Embed this calculator on your site — free
Advertisement
Ad slot A
How this refinance calculator works
Both loans use the same amortization formula every lender uses:
M = L × r ÷ (1 − (1 + r)−n)
where L is the loan amount, r is the monthly rate (annual ÷ 12) and n is the number of monthly payments. The calculator builds a full month-by-month schedule for your current loan and your new loan, then compares them at every single month.
The break-even method — and why it's not just cost ÷ savings
Most refinance calculators divide closing costs by monthly savings and call that break-even. That's wrong, because it ignores what your balance is doing. This tool compares the total cost of walking away in any given month: everything you'd have paid so far plus the balance you'd still owe. The refinance wins the moment that combined figure drops below the same figure for your current loan.
You owe $280,000 at 7.25% with 26 years left — a payment of $1,996.52. You refinance into a 30-year at 5.75% with $6,000 in closing costs paid at signing. The new payment is $1,634.00, saving $362.52 a month.
The quick-and-dirty method says $6,000 ÷ $362.52 ≈ 17 months. This calculator says 18 months — because the new 30-year loan pays principal down more slowly at first, so your balance stays slightly higher. That one-month gap is small here but grows large when you stretch a short loan back out to 30 years. Held to the end, this refinance saves about $28,673.
When it silently loses money
Change one thing in that example — say you had only 10 years left at 6% instead of 26 at 7.25%. Refinancing into a 30-year at 5.75% cuts your payment from $3,108 to $1,634, an apparent saving of nearly $1,475 a month. But the break-even never arrives: over the full term it costs you about $221,000 more. The calculator will tell you that outright instead of showing you the monthly saving and staying quiet.
The break-even month is the only number that matters
A refinance is a trade: you pay real money today to lower your payments tomorrow. The break-even month is the day that trade turns profitable — and if you sell, move or refinance again before it arrives, you simply lost the closing costs. That's why this calculator asks how long you plan to keep the home and gives you a straight verdict rather than a wall of figures. The old rule of thumb was "refinance if you can drop your rate by 1%," and it's useless: a 0.5% drop on a $600,000 balance with cheap closing costs is a clear win, while a 1.5% drop on an $80,000 balance with $7,000 of fees can take a decade to repay. The size of your balance and the size of your fees matter at least as much as the size of the rate cut.
Three ways refinancing quietly costs you money
Resetting the clock. This is the big one. If you're eight years into a 30-year loan and refinance into a fresh 30-year, you've just signed up for 38 years of payments on the same house. Your monthly bill drops, so it feels like a win, but you can easily pay more interest overall. When your new term is longer than what you had left, this calculator shows a second card with the payment you'd need to keep your original payoff date — that's usually the honest comparison.
Rolling in the closing costs. Financing your fees means no cash at signing, which is genuinely useful if cash is tight. But you'll pay interest on that $6,000 for up to 30 years, which can easily double its real cost. Toggle between "Pay cash" and "Roll in" to see the gap.
Cash-out creep. Taking equity out at a lower rate can be sensible — consolidating a 22% credit card into a 6% mortgage is real arithmetic. But you've converted unsecured debt into debt secured against your home, and stretched it over decades. Run the numbers, then run them again with the debt payoff calculator before deciding.
What the numbers can't see
These are planning estimates. Your actual rate depends on credit score, loan-to-value, points purchased and the day you lock. Closing costs vary widely — appraisal, origination, title, recording — and the figure on your Loan Estimate is the one that counts. This tool models fixed-rate loans; if you're moving into or out of an ARM, the reset schedule changes everything after the fixed period. It also ignores tax treatment: mortgage interest deductibility differs by country and by whether you itemise, and points paid on a refinance are generally amortised rather than deducted at once. And some loans carry prepayment penalties in their early years — check your current note before you pay it off.
One last thing worth its own sentence: get quotes from at least three lenders. Rate spreads of 0.25–0.5% between lenders on the same borrower are routine, and on a $300,000 balance that's worth far more than any optimisation you'll find on this page.
Advertisement
Ad slot B
Frequently asked questions
What is the break-even point on a refinance?
It is the month when the refinance has repaid what it cost you. This calculator finds it by comparing the total cost of exiting each loan in every month - the payments you have made so far plus the balance you still owe - rather than simply dividing closing costs by monthly savings. The refinance is worth doing if you will still own the home past that month.
How much does it cost to refinance a mortgage?
Closing costs typically run 2-5% of the loan amount, covering origination, appraisal, title, credit and recording fees. On a $280,000 refinance that is roughly $5,600 to $14,000. Your Loan Estimate lists the exact figures, and lenders are required to give you one within three business days of applying.
Is it worth refinancing for a 1% rate drop?
That old rule of thumb ignores the two things that matter most: your balance and your fees. A 0.5% drop on a large balance with low costs can break even in under a year, while a 1.5% drop on a small balance with high fees may take a decade. Enter your own numbers rather than relying on a percentage threshold.
Does refinancing restart my loan term?
Yes, unless you deliberately choose a shorter term. Refinancing replaces your existing loan with a brand new one, so eight years into a 30-year mortgage a fresh 30-year loan means 38 total years of payments on the same property. This calculator flags that and shows what payment would keep your original payoff date.
Should I roll closing costs into the new loan?
It depends on your cash position. Rolling them in means nothing due at signing, but you borrow that amount and pay interest on it for the life of the loan, which can double its real cost over 30 years. Paying cash is cheaper overall if you can comfortably afford it. Toggle between the two options to see the difference in your own situation.
What is a no-closing-cost refinance?
The costs do not disappear - the lender either adds them to your balance or charges a higher interest rate to cover them. A slightly higher rate across the whole term is often more expensive than paying the fees upfront, though it can be the right call if you expect to move within a few years. Model it by raising the new rate and setting closing costs to zero.
Will refinancing hurt my credit score?
Modestly and temporarily. The application creates a hard inquiry and the new account lowers your average account age, typically costing a handful of points for a few months. Rate shopping with multiple lenders inside a short window is usually treated as a single inquiry by scoring models, so comparing offers does not multiply the damage.
When should I not refinance?
If you plan to sell before the break-even month, if your current loan carries a prepayment penalty that outweighs the savings, if your credit or home value has fallen enough that you would not qualify for a materially better rate, or if you are close to paying the loan off - late in a mortgage almost every payment goes to principal, so there is little interest left to save.