Refinance Break-Even Calculator
Calculate exactly how many months it takes to recoup your refinancing costs, and how much you’ll save over the life of your new loan.
Is Refinancing Worth It?
Enter your current loan details and the new loan terms to see your break-even timeline and total savings potential.
When Should You Refinance?
The Break-Even Rule of Thumb
A break-even point under 24 months is generally considered excellent — you’ll recoup your costs quickly and have years of net savings ahead. A break-even between 24 and 36 months is good but requires some confidence that you’ll stay in the home. Over 48 months, you need to be very certain about your timeline. If you might sell in the next 3–4 years, the math often doesn’t work.
Rate-and-Term vs. Cash-Out Refinance
A rate-and-term refinance simply changes your interest rate, loan term, or both — no cash out. The math is straightforward: lower rate or shorter term, with closing costs to recoup. A cash-out refinance replaces your mortgage with a larger loan and puts the difference in your pocket. It’s useful for home improvements, debt consolidation, or major expenses, but increases your balance and typically carries a slightly higher rate. This calculator is designed for rate-and-term refinances.
The Hidden Danger: Extending Your Term
Refinancing from a loan with 20 years remaining into a new 30-year loan can dramatically lower your payment — but you’re adding 10 years of payments. Even at a lower rate, you may pay significantly more total interest over your lifetime. A shorter-term refinance (say, from 30 to 15 years) usually costs more per month but can save a fortune in interest and build equity dramatically faster. Always check the total interest comparison, not just the monthly savings.
Closing Cost Strategies
Pay Upfront
Best if you plan to stay long-term. Maximizes lifetime savings.
Roll Into Loan
No cash out-of-pocket, but you'll pay interest on the costs over the loan term.
No-Closing-Cost Loan
Lender covers costs in exchange for a higher rate. Break-even is instant, but lifetime savings are lower.
When NOT to Refinance
- You plan to sell within the break-even period
- You’re close to paying off your loan — interest savings are small
- Your credit score has dropped significantly since your current loan
- You would extend the term significantly and don’t need the cash flow
- The rate difference is less than 0.5% (break-even is likely very long)
Points: Do They Make Sense?
Buying points means paying 1% of the loan amount upfront for approximately a 0.25% rate reduction. Whether this makes sense depends entirely on how long you stay. Divide the point cost by your monthly savings to find your point-specific break-even. Points almost never make sense if you plan to sell or refinance again within 5 years.