Refinance Break-Even Calculator
Example: Current loan balance: 300000 $ · Current interest rate: 7.25 % · New interest rate: 6 % · Remaining loan term: 27 years · Refinance closing costs: 6000 $
| Break-even point | 25 |
| Monthly payment savings | $241 |
| Lifetime savings | $71,963 |
Worked example
Suppose you owe $300,000 with 27 years left at 7.25%, and you can refinance to 6.0% for $6,000 in closing costs. Your payment falls from about $2,077 to roughly $1,838 — a saving of $239 a month. Dividing the $6,000 cost by that $239 gives a break-even of about 25 months, just over two years. Stay longer than that and you are ahead; over the full remaining term the lower rate saves well over $70,000 net of the closing costs.
Frequently asked questions
What is the break-even point on a refinance?
It is the number of months of lower payments needed to recover the upfront closing costs. Before that point you have spent more than you have saved; after it, the savings are pure gain if you keep the loan.
When is refinancing not worth it?
If you expect to sell or refinance again before break-even, or if the rate drop is too small to overcome the closing costs, refinancing can cost you money. Time in the home is the deciding factor.
Should I refinance to a shorter term?
Refinancing from a 30-year into a 15-year can save enormous interest, but the monthly payment usually rises. This tool assumes you keep a similar remaining term; a shorter term changes both the payment and the savings math.
Can I roll closing costs into the loan?
Often yes, which avoids paying cash upfront but increases your balance and slightly raises the payment. The break-even still applies — you are just financing the cost rather than paying it directly.