Refinance Break-Even Calculator
Compare your loan with a new one and see how long the lower payment takes to cover the closing costs.
How to use ↓Result
Homeowner Calculator · Refinance Break-Even Calculator · homeowncalculator.com
Estimate only, based on your inputs. It may be inaccurate and is not financial advice. Confirm every figure with your lender before you decide.
Payments are rounded up to the next cent, so they can differ from lender documents by a cent.
How to use
- Enter your current balance, rate and the years left on the loan.
- Enter the new rate, the new term and the closing costs.
- Tick the box if the costs would be added to the new loan.
- Press Calculate to see the payment change and break-even.
When refinancing pays off
A refinance replaces your loan with a new one. The break-even point is how long you need to keep the new loan before the savings cover what it cost to get it.
There are two ways to measure it. The first divides the closing costs by the monthly payment saving. The second compares the interest each loan charges and finds the month when the interest saved reaches the costs. The second counts costs added to the loan and the effect of restarting a longer term, so it is often later.
Enter principal and interest only for your current payment, not the total that includes taxes and insurance. If you add the closing costs to the new loan, the first method does not apply and only the interest-based break-even is shown. This is not a Loan Estimate and shows no APR.
This site does not show current rates. Enter the rate and the closing costs from a Loan Estimate you have, and try different terms. A lower payment on a longer term can still cost more in total interest.
Worked example
A $280,000 balance at 7% with 27 years left, refinanced into a 30-year loan at 6% with $6,000 of closing costs. The payment falls from $1,925.89 to $1,678.75, a saving of $247.14 a month. Dividing the costs by the saving gives a break-even of 2 years 1 month. Counting interest month by month, the interest saved reaches the costs after 2 years 3 months.
Because the new loan is 3 years longer, the interest over the rest of both loans changes by $19,639.09 before costs, and $13,639.09 after the $6,000. With a new term of 27 years instead, the same rates give a monthly saving of $178.73 and $51,901.49 net. The term you pick changes the answer. These are example numbers, not current rates.
FAQ
What is the break-even point?
The time it takes for the savings from the new loan to cover its closing costs. Staying in the loan past that point is where an estimated saving begins.
What counts as closing costs?
Lender fees, points, title and settlement charges, the appraisal and similar costs. Use the total from your Loan Estimate.
Why are there two break-even figures?
One divides costs by the payment saving. The other follows the interest on both loans month by month. They differ most when the new loan has a longer term.
What if I might move before break-even?
Then the new payment would not have recovered the costs. Compare the break-even time with how long you expect to keep the loan.