Refinance Break-Even Calculator
Calculate exactly how many months it takes for your refinancing savings to recoup the closing costs.
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Visualization
How It Works
The refinance break-even point is the number of months it takes for your monthly payment savings to fully cover the upfront closing costs. If you plan to stay in the home past the break-even point, refinancing saves you money. If you might move sooner, the closing costs could outweigh the savings.
The Formula
Monthly Savings = Current Payment - New Payment
Total Savings = Monthly Savings x Months Staying - Closing Costs
Variables
- Closing Costs — Total upfront cost of refinancing (appraisal, origination, title, etc.)
- Monthly Savings — Difference between old and new monthly payments
Worked Example
Your closing costs are $5,000. You save $300/month by refinancing. Break-even is $5,000 / $300 = 17 months. If you stay 10 years, your total net savings are $300 x 120 - $5,000 = $31,000.
Practical Tips
- A break-even period under 24 months is generally considered a strong case for refinancing.
- Include all costs: application fee, appraisal, title search, origination fee, and any points purchased.
- If you plan to move within 2-3 years, refinancing may not be worthwhile unless your savings are very large.
- Consider a no-closing-cost refinance if your break-even period would otherwise be longer than your planned stay.
- The break-even calculation is a simplified view. For precision, also compare total interest paid over each loan.
Frequently Asked Questions
What is a good break-even period?
Most financial advisors consider a break-even period of 2 years or less to be favorable. Beyond 3-4 years, refinancing becomes riskier since life circumstances may change.
Does this account for the new loan term?
This calculator focuses on the monthly savings versus closing costs. For a complete picture, also use the Refinance Savings Calculator which compares total costs over both loan terms.
What if my new payment is higher?
If your new payment is higher (e.g., you shortened the term), there are no monthly savings to recoup costs. The benefit comes from reduced total interest, not monthly savings.
Should I include escrow changes?
Only compare the principal and interest portions of your payment. Property taxes and insurance (escrow) typically remain the same regardless of refinancing.
What costs are included in closing costs?
Common costs include loan origination (0.5-1% of loan), appraisal ($300-600), title insurance ($500-1,500), credit report fees, and recording fees.