Refinance Break-Even Calculator

The break-even point is the number of months of reduced payments needed to recover the closing costs of the new loan: closing costs ÷ monthly payment reduction. If closing costs are $6,000 and the payment falls by $250, break-even is 24 months. Selling or refinancing again before that point means the closing costs were not recovered through the lower payment.

Yes, and it is common. Refinancing usually restarts the amortisation clock. Replacing 22 years remaining with a fresh 30-year term at a lower rate can reduce the monthly payment while increasing total interest, because the balance stays outstanding for eight additional years. This calculator reports both figures separately — the payment change and the lifetime interest change — because they frequently point in opposite directions.

Typically an origination or lender fee, appraisal, title search and title insurance, recording fees, credit report, and any discount points purchased. Together these commonly run 2% to 5% of the loan amount. Some lenders advertise a no-closing-cost refinance, which generally means the costs are financed into the balance or offset by a higher rate rather than eliminated.

Rolling costs into the balance avoids paying them up front but increases the amount financed, so interest accrues on them for the full term. This calculator assumes closing costs are paid out of pocket, which keeps the break-even figure explicit. To model rolling them in, add the costs to the current balance field and set closing costs to zero.

There is no universal threshold — the old "1% rule" ignores loan size, remaining term, and how long the property will be held. A large balance can justify a small rate reduction, while a small balance may not justify a large one. The relevant comparison is the break-even month against how long the loan will realistically be held, plus the lifetime interest difference shown above.

A blank closing-costs box is treated as $0, and an entered 0 means the same thing — that is the setting described above for modelling costs rolled into the balance. With no costs to recover, the break-even reads Immediate rather than a number of months. A negative entry is neither: it is not an amount, so the calculator withholds the comparison and names the field instead of substituting $0. The same rule applies to the balance, both rates, the years remaining, and the new term.

A refinance triggers a hard credit inquiry and replaces one account with another, which can move a credit score modestly and temporarily. Mortgage interest deductibility rules depend on loan purpose, balance limits, and whether deductions are itemised. Consult a qualified tax professional about your specific situation — this calculator models cash flow only.