Mortgage Refinance Break-Even Calculator
Find out how many months it takes for a mortgage refinance to pay for itself. Compare your current loan against a new rate, factor in closing costs, and see true lifetime savings.
What Is a Refinance Break-Even Point?
The refinance break-even point is the number of months you must stay in your home after refinancing for the accumulated monthly payment savings to equal the closing costs you paid at refi. If you sell or refinance again before the break-even month, you lose money on the deal. If you stay past it, every additional month of lower payments is pure savings. The break-even formula is simple: closing costs divided by monthly payment reduction equals the number of months to recoup.
A classic rule of thumb says refinancing is worth it if the new rate is at least 0.5 to 1 percentage point below your current rate and you plan to stay in the home for 3 to 5 more years. This calculator lets you test any combination of balance, rate, term, and closing costs against that rule.
How the Calculation Works
Two monthly payments are computed using the standard amortization formula. Payment = Balance times (r times (1 + r)^n) divided by ((1 + r)^n - 1), where r is the monthly rate and n is the number of payments. The difference between current and new monthly payment is your monthly savings. Divide closing costs by monthly savings to get break-even months. The calculator also shows total lifetime interest on both loans so you can spot the trap of resetting a 27-year loan back to 30 years — even at a lower rate, a longer term can cost more in total interest despite lower monthly payments.
Real-world tip: if your rate drop is small but closing costs are high, consider a no-cost refinance where the lender pays closing costs in exchange for a slightly higher rate. The break-even is instant but lifetime savings are smaller.
When Refinancing Makes Sense
Refinancing is most profitable when your new rate is at least 0.75 to 1 percent lower, you plan to stay at least 3 years, and you can avoid extending the term dramatically. Other good reasons: eliminating private mortgage insurance once you hit 20 percent equity, converting an adjustable-rate mortgage to a fixed rate before it resets, or consolidating a HELOC into a single fixed-rate first mortgage. Avoid refinancing if you plan to move within 18 months, if your credit score has dropped since the original loan, or if closing costs exceed 5 percent of the balance.
Always shop at least 3 lenders and get Loan Estimates on the same day so the rates are comparable. Lender fees vary widely, and Origination Charge is the most negotiable line item. Last updated April 2026.