Mortgage refinance calculator and break-even point
Your refinance break-even point is closing costs divided by monthly savings. On a $300,000 balance, refinancing from 7.25% to 6.25% for 30 years cuts the payment from $2,100 to $1,847.15, saving $252.85 a month. With $6,000 in costs you break even in about 24 months.
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How the break-even point works
A refinance replaces your loan with a new one, usually at a lower rate, but you pay closing costs to do it. The break-even point is how long it takes the monthly savings to repay those costs.
break-even months = closing costs ÷ monthly payment savings
If you plan to sell or refinance again before that date, the refinance costs you money. If you stay longer, every additional month is savings. The calculator also uses your balance, rate and payment to work out how many months are left on your current loan, so it can compare total cost.
When a refinance makes sense
- The new rate is meaningfully lower, often 0.75 to 1 percentage point or more.
- You will stay in the home past the break-even date.
- You are not restarting a 30-year clock after many years of payments, or you accept the extra interest.
- You want to drop PMI, switch from an adjustable to a fixed rate, or shorten the term.
Rolling costs into the loan avoids cash upfront but raises the balance and the interest you pay.
Rate drop vs term reset
A lower payment is not always a lower cost. Resetting to 30 years stretches payments and often adds interest.
| Scenario | New payment | Break-even | Lifetime difference |
|---|---|---|---|
| $300,000, 7.25% to 6.25%, 30 years | $1,847.15 | 24 months | +$22,276 |
| $200,000, 7% to 6.9%, 30 years | $1,317.20 | 28 months | −$91,302 |
3 real-life examples
$300,000 balance, 7.25% to 6.25%, $6,000 costs
Remaining term on your current loan: about 330 months at a $2,100 payment. New 30-year payment: $1,847.15, a savings of $252.85 a month. Break-even: \( \dfrac{\$6{,}000}{\$252.85} = \) 23.7 months. Over the remaining life, you save about $22,276 net of costs.
Same loan with costs rolled in
New balance $306,000 at 6.25% gives a payment of $1,884.09, saving $215.91 a month. Break-even moves out to about 28 months, and the lifetime benefit drops to about $14,976.
$250,000 at 6.5% to a 15-year loan at 5.75%
Your payment rises from $1,700 to $2,076.03 because the term is shorter, so there is no monthly savings. But total remaining payments fall from about $501,129 to $378,185 including $4,500 of costs, a difference of about $122,945.