Refinance Break Even Calculator
A lower payment is not the same as a better deal. This shows the month the refinance actually pays for itself, and whether it costs you more over the life of the loan.
Your current loan
The new loan
You break even in
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Break even is the only number that matters at first
A refinance is a purchase. You are buying a lower payment, and the price is the closing costs. Break even is simply how long it takes the thing you bought to pay for itself: closing costs divided by monthly savings. If your costs are $6,000 and you save $300 a month, you are whole in 20 months.
Which means the real question is not "is the new rate lower." It is "am I staying in this house longer than the break even." If you are moving in a year and break even is at month 20, a lower rate still loses you money. If you are staying a decade, almost any reasonable break even is worth clearing.
The trap: a lower payment that costs more
Here is the part most refinance calculators quietly skip. If you are 3 years into a 30 year loan and you refinance into a brand new 30 year loan, you did not just lower your rate. You reset the clock to 30 years. The payment drops, partly because the rate is better and partly because you just stretched the balance over more time.
Stretch it far enough and you can end up paying more total interest at a lower rate. That is why this calculator shows the lifetime interest change, not just the monthly savings. Watch that row. If it turns positive, the refinance is buying you monthly cash flow and charging you for it over the long run. That can still be exactly the right trade — cash flow has real value — but you should make that call knowing it, not by accident.
The fix, when it fits the budget: refinance into a shorter term. Drop the term to 20 or 15 years and you often keep the payment relief and cut lifetime interest at the same time.
For the loan officers reading this
Show the lifetime interest row. Every time. Yes, it occasionally kills a deal you would have closed by only showing the payment drop. It also means no client of yours ever discovers, three years later, that the refi you sold them added interest they did not understand they were taking on. One of those outcomes builds a referral business. The other ends one.
Common questions
How do I calculate my refinance break even point?
Divide your total closing costs by your monthly savings. The result is the number of months before the refinance has paid for itself. If you plan to sell or refinance again before that month, the deal loses money.
Does rolling closing costs into the loan avoid the cost?
No. It moves it. You pay nothing at the table, but you borrow more, so you pay interest on the costs for the life of the loan. Break even in a technical sense arrives immediately, but the cost has not gone anywhere. Toggle the option above to see both.
Is it worth refinancing for a 1% lower rate?
There is no universal rule, and the old "1% rule" is not one. What matters is your break even and how long you are staying. Run your own numbers. A 0.5% drop on a large balance with low costs can be excellent. A 1% drop with heavy costs on a loan you will exit in two years is not.