Refinance Break-Even Calculator
See the honest break-even on a refinance — the term-matched comparison and the lifetime cost, not just the "months to recoup fees" number every other calculator shows.
$7,843
Total P&I on the new loan, plus fees, is MORE than carrying the current loan to the end of its remaining term — even though the naive break-even below looks favorable.
Your new term is longer than what's left on your current loan. Part of the "monthly saving" below is borrowed from stretching 25 remaining years into a fresh 30. The naive break-even treats that stretch as free; the lifetime figure above and the term-matched comparison below do not.
1 yr 4 mo
Monthly saving: $493
New payment: $2,463
2 yr 1 mo
Real monthly saving: $317
Term-matched payment: $2,639
Current payment
$2,956
New payment (30 yr)
$2,463
Interest if you keep the current loan
$486,789
Total cost of refinancing (incl. fees)
$494,633
Interest saved, term-matched
$87,186
Closing costs are paid upfront at closing, the default this calculator uses.
How this works
Computes the standard payment on your current loan and on a new loan at a new rate — reusing the same amortizing-loan PMT formula as the Mortgage calculator — then reports THREE numbers side by side rather than one: the naive break-even (new loan against its own, usually longer, term), a term-matched break-even (new rate over the exact months remaining on your current loan), and the lifetime cost effect of refinancing over the new loan's full term.
The naive break-even (closing costs ÷ monthly saving) is what every other refinance calculator shows. It is arithmetically correct and, whenever the new loan resets the term, materially misleading: it compares a shorter remaining obligation to a longer one and calls the difference "savings." This calculator never shows that number alone.
Key assumptions
- Default closing costs $8,000, paid upfront rather than rolled into the new loan — upfront is the case the break-even question is actually asking (cash recovered), and rolling costs in grows the balance without you choosing to. Rolling in is offered as a toggle; the calculator states plainly when it removes a cash-outlay break-even.
- Both the current and new payment use the standard amortizing-loan PMT formula: PMT = P·i / (1 − (1+i)^−n).
- Total interest and lifetime cost are computed against the loan's full remaining/new term, not a fixed horizon — a shorter remaining term or a longer new term both show up honestly in the lifetime figure.
What this leaves out
- Tax deductibility of mortgage interest — the Rent vs. Buy / Buy vs. Stay itemization model is not applied here, since a refinance decision is usually made on cash flow, not marginal tax effects.
- Rate float, points, and lender-credit tradeoffs — the new rate you enter is treated as locked and final.
- Opportunity cost of the closing costs themselves (what they'd be worth invested instead) — only their effect on the loan is modeled.
Related calculators
A worked example: refinancing $400,000 at 7.5% into 6.25%
You owe $400,000 at 7.5% with 300 months (25 years) left. A lender offers 6.25% on a new 30-year loan, with $8,000 in closing costs paid upfront. Your current payment is $2,955.96. The new payment, over its own fresh 360-month term, is $2,462.87 — a monthly saving of $493.10. Divide $8,000 by that saving and you get the number every refinance calculator online shows you: 16.2 months to break even.
That number is arithmetically correct and it is not the whole truth. The new loan runs 360 months; the old one had 300 left. Comparing the two payments treats a 30-year obligation as if it were the same commitment as a 25-year one. Carry the new loan to its full term and the total interest is $486,632.77 — plus the $8,000 fee, $494,632.77 all in. Keeping the old loan to the end of its remaining 300 months would have cost $486,789.41 in interest. Refinancing here actually costs $7,843.36 MORE over its life than not refinancing at all, even though it "breaks even" in 16 months on paper.
The honest comparison holds the term fixed: what would 6.25% cost over the SAME 300 months you have left, not a fresh 360? That payment is $2,638.68 — a real saving of $317.29 a month, a break-even of 25.2 months, and $87,186.16 of interest actually saved over the life of the loan. That is the number worth acting on. The 16-month figure is the one worth ignoring, because it was never actually comparing like to like.
Frequently asked questions
Why does this calculator show two different break-even numbers?
Because they answer different questions. The naive break-even — closing costs divided by the raw monthly payment difference — tells you how many months of the NEW loan's lower payment it takes to recoup the fee, but it silently compares a longer term against a shorter one. The term-matched break-even holds the term fixed at what you actually have left on your current loan, so the payment difference reflects the rate change alone. When your new loan's term is not longer than your current remaining term, the two numbers are the same calculation. When it is longer — the common case — they diverge, and the term-matched figure is the one that isn't hiding anything.
If the naive break-even is 16 months, how can refinancing cost more overall?
Because a lower monthly payment on a longer loan isn't free money — part of it is the loan being repaid more slowly. Stretching 300 remaining months of debt into a fresh 360-month term adds 5 years of payments you would not otherwise have made. Even at a meaningfully lower rate, that extra stretch can cost more in total interest than the rate cut saves. The naive break-even only looks at cash flow in the first few years; it says nothing about the last five.
Should I always choose the term-matched loan structure instead?
Not necessarily — this calculator isn't telling you which loan to take, only what each one actually costs over its life. A longer term can be the right call if lowering your required monthly payment matters more to you than total interest paid, for example to free up cash flow during a specific stretch of years. The point is to make that trade-off with the lifetime number in view, not to mistake a lower payment for a smaller total cost.
What's the default assumption about paying closing costs?
This calculator defaults to closing costs paid out of pocket at closing, because that's the case the break-even question is actually about: cash you spend now that you're trying to recover. You can toggle to roll costs into the new loan instead — in that mode there's no upfront cash outlay, so a cash-recovery break-even doesn't apply and the calculator says so directly, but the higher principal still shows up in the lifetime cost figure. Rolling costs in is never free; it just moves the cost from your closing table into your balance.
Does this account for taxes, PMI, or points?
No. Mortgage-interest deductibility is modeled on the Rent vs. Buy and Buy vs. Stay pages, where the itemization math already lives — a refinance decision is usually made on cash flow and total cost, not marginal tax effects, so it's left out here to keep the inputs focused. PMI and discount points aren't modeled either; fold any points into the closing costs figure and enter the rate you'd actually get after paying them.
Sources
- Primary Mortgage Market Survey
Freddie Mac — checked 2026-08-12
Weekly national average mortgage rate survey, a standard reference for the default mortgage rate.
- 30-Year Fixed Rate Mortgage Average in the United States (MORTGAGE30US)
Federal Reserve Bank of St. Louis (FRED) — checked 2026-08-12
Same series as the Freddie Mac PMMS, republished by FRED.
*The calculations provided are for illustrative purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any decisions.