Refinance Break-Even Calculator
A refinance is a bet that you stay in the house long enough for the monthly saving to pay back the closing costs. This works out that month, and separates the saving from the term reset that usually causes it.
Refinance break-even calculator
Same rate, different term
| Option | Payment | Interest over life | Months |
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Break-even at other closing costs
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Break-even is the whole question, at first
Closing costs are sunk the day you sign. The refinance only makes you money after the monthly saving has covered them. On a $241 monthly saving and $4,500 of costs that is 18.7 months, so the 19th payment is the first one you keep. If you sell or refinance again before that month, the refinance is a net loss no matter how good the rate looked.
This is why a refinance is really a bet on how long you stay. At 19 months the break-even is short enough to be comfortable for most owners; at 40 months it starts to depend on plans you may not control.
The term reset is where most of the saving comes from
Two things change at once when you refinance: the rate, and the clock. A 30-year refinance on a loan with 27 years left restarts the amortization, so the payment falls for two reasons, and only one of them is the lower rate.
On this loan the rate drops 0.8 points, which alone would take the payment from $2,180 to about $2,030. Restarting the clock at 30 years takes it the rest of the way to $1,939. The extra 36 months are why the payment looks so much better than the rate change justifies — and why the total interest, $378,106, is only $8,275 lower than the loan you already had, despite paying for three extra years.
Compare like with like
The honest comparison keeps the term constant. Refinancing $320,000 at 6.1 percent over the remaining 27 years gives a payment of about $1,974 — higher than the 30-year quote, but the loan ends when it was always going to end, and the interest saving is much larger.
Neither answer is wrong. Restarting the term lowers the monthly obligation, which is the right move if cash flow is the problem. Keeping the term is the right move if the goal is to pay less interest. What is wrong is comparing a 30-year refinance quote against a 27-year existing loan and calling the difference a rate saving.
Cash-out is a different decision
A cash-out refinance replaces your mortgage with a bigger one and hands you the difference. The break-even math still applies to the whole loan, but the money you take out has its own purpose and its own cost — the rate on the entire new balance, not just the cash. Taking $40,000 out at 6.1 percent over 30 years costs about $242 a month and roughly $47,000 in interest over the life of the loan.
A home equity loan or line of credit second mortgage keeps the original loan intact and prices only the new money. It is usually the better structure when the first mortgage rate is already low.
When not to refinance
When the rate gap is under about half a point, the closing costs rarely pay back inside a realistic holding period. When there is a prepayment penalty on the existing loan, which some portfolio and government loans still carry. When the credit score has fallen since origination, because the new rate may not beat the old one at all. And when the break-even lands beyond the date you expect to move — in which case the right answer is to keep the loan you have and put the closing costs toward principal instead, which is what the early payoff calculator works out.
Frequently asked questions
How long does it take to break even on a refinance?
Divide the closing costs by the monthly saving. On $4,500 of costs and a $241 saving it is about 19 months. Under 24 months is generally considered a comfortable break-even.
Is a lower payment always worth refinancing for?
No. Part of a lower payment usually comes from restarting the term, not from the rate. Compare a refinance over the same remaining term to see what the rate change alone is worth.
How much does refinancing cost?
Typically 2 to 5 percent of the loan amount, or $4,000 to $8,000 on a $200,000 balance. Lender fees, title insurance, appraisal and recording make up most of it.
Should I refinance to a 15-year term?
Only if the higher payment fits comfortably. The rate is usually lower and the interest saving is large, but the obligation is fixed and the payment can be 40 percent higher than a 30-year.
Does refinancing reset the 30-year clock?
Yes, if you take a new 30-year term. That is why the payment falls more than the rate change explains, and why the total interest may barely move even at a lower rate.
Can I refinance if my home value has dropped?
Sometimes, through a streamlined program or with mortgage insurance, but most lenders cap the loan at 80 to 97 percent of the current appraised value. A low appraisal can kill the application.
Is a cash-out refinance a good idea?
It prices the entire new balance at the new rate, not just the cash you take. A home equity loan or line of credit often costs less when the existing first mortgage rate is already low.
Disclaimer: This calculator compares two loans arithmetically. It does not include taxes, mortgage insurance, prepayment penalties or the cost of an appraisal that may not support the new loan. Confirm every figure on a Loan Estimate.
Citing this page? FigureMill, “Refinance Break-Even Calculator” (last reviewed October 31, 2026). Refinance payment comparison, monthly saving and break-even month from current balance, both rates, both terms and closing costs. https://figuremill.com/home-tax/refinance-break-even-calculator
Related: Mortgage payment calculator · Closing costs calculator · Early payoff calculator · All home tax tools