Refinance Calculator — Break-Even & Monthly Savings
Compare your current loan to a refinance offer: new payment, monthly savings, break-even on closing costs, and net savings over your time in the home.
A clear path from inputs to results.
Decide whether refinancing your mortgage actually pays off. Enter your current balance, rate, and remaining term, then the offer you have been quoted, and see the new payment, the monthly saving, how many months it takes to recover closing costs, and your net position for as long as you plan to stay.
How to use
- Enter your current loan balance — the amount you still owe today, not the original loan size.
- Enter your current interest rate and the remaining term in months (27 years left is 324).
- Enter the new rate you have been quoted and the new term in years.
- Enter your estimated closing costs — lender fees, title, appraisal, and points combined.
- Set how many more years you expect to stay in the home; net savings are measured over that horizon.
- Read the results: monthly savings, break-even months, and the cumulative net-position curve, which crosses zero exactly where the refinance has paid for itself.
The formula
Reference: Annuity-immediate payment formula (Broverman, Mathematics of Investment and Credit) with the APR treated as a nominal annual rate compounded monthly; break-even is fixed cost divided by periodic saving. Reg Z Appendix J governs the disclosed APR, which this model takes as an input rather than recomputing.
Worked example
7.25% loan with 27 years left, refinancing to 5.5%
- Current balance $350,000; current rate 7.25%; remaining term 324 months; new rate 5.5%; new term 30 years; closing costs $6,500; planning to stay 10 years.
- 1
The current payment is recomputed from today's balance: $350,000 at 7.25% ÷ 12 over 324 months is $2,464.68. The new loan is $350,000 at 5.5% ÷ 12 over 360 months, or $1,987.26. Monthly savings are $2,464.68 − $1,987.26 = $477.42, so break-even is $6,500 ÷ $477.42 ≈ 13.6 months, which the tool rounds to 14. Staying 10 years produces 120 months of savings: $477.42 × 120 − $6,500 = $50,790.10 net.
New payment $1,987.26; monthly savings $477.42; break-even 14 months; net savings $50,790.10 over a 10-year stay.
Interpreting the result
A refinance only wins if you stay past the break-even month. Within the first 14 months the closing costs are not yet recovered; every month after that adds $477.42 of net benefit. Watch the term as well as the rate — this example lowers both, but a quote that cuts the payment by stretching to a fresh 30-year term can still raise total interest, so compare the cumulative payment totals in the ledger, not just the monthly figure.
Assumptions & limitations
- Both loans are fixed-rate, fully amortizing annuities with monthly payments; adjustable rates, interest-only periods, and balloon structures are not modeled.
- Closing costs are paid in cash at closing and are not financed into the new balance.
- Payments cover principal and interest only; taxes, insurance, and HOA dues are assumed unchanged by the refinance and are excluded.
- Savings are nominal: no discounting, reinvestment rate, or opportunity cost is applied, and break-even is rounded to whole months.
- The current payment is derived from the balance and remaining term you enter, so an incorrect remaining term will skew the comparison.
Frequently asked questions
How is the break-even point calculated?
Break-even equals closing costs divided by the monthly savings, rounded to the next whole month. In the worked example, $6,500 ÷ $477.42 is about 13.6, shown as 14 months. If the new payment is not lower than the recomputed current payment, no break-even exists and the tool reports that refinancing never pays off.
Why is my new payment so much lower — is something hidden in the math?
Two forces lower the payment: the rate cut and the fresh term. The tool recomputes your current payment from the remaining balance and remaining months, so the rate effect is measured fairly, but a longer new term means more years of payments. Check the ledger totals: in the example, remaining payments fall from $798,555.99 to $715,414.14 even with the longer 30-year term, but a different quote could cut the payment while raising that total.
Are closing costs the only upfront cost counted?
Yes. Everything you expect to pay at closing — lender fees, appraisal, title work, and points — should be entered in the single closing-costs field. Ongoing costs such as escrowed taxes and insurance are assumed unchanged by the refinance and are excluded from the math.
I plan to move soon — should I still refinance?
Compare your expected stay with the break-even. Net savings equal the monthly saving times the months stayed, minus closing costs: in the example, two years nets $4,958.02, five years nets $22,145.05, and ten years nets $50,790.10. If your horizon is shorter than the break-even month, the math says you lose money.
Does it matter that my loan is already years old?
Yes, and the tool accounts for it. Instead of assuming your original payment, it recalculates the level payment that would amortize your current balance over the months you have left. At 7.25% with 324 months left on $350,000, that baseline is $2,464.68 — not the payment you started with.
Methodology last reviewed 2026-10-06. Results are informational and not financial or engineering advice — see our disclaimer.