Refinancing can lower your monthly payment, but it comes with closing costs. This calculator estimates how many months of lower payments it takes to recover those costs, and compares total payments when the new loan has a different term.
How the break-even point is calculated
Break-even (months) = closing costs ÷ monthly savings
Monthly savings is your current principal-and-interest payment minus the new one. The result is rounded up to the next whole month. If the new payment is not lower, there is no break-even point from payment savings alone.
Example
The current payment is $2,100 and the new payment would be $1,850, a saving of $250 a month. With $6,000 in closing costs, break-even is $6,000 ÷ $250 = 24 months. Over five years, the saving would be $15,000 in payments minus $6,000 in costs, or about $9,000.
But if the current loan has 300 months left and the new loan runs 360 months, total remaining payments rise from $630,000 to $666,000, plus $6,000 in costs. That is about $42,000 more overall, even though the monthly payment is lower.
Why a lower payment isn't the whole story
- Loan term: Restarting a 30-year term can lower the payment while increasing total interest.
- Remaining balance: Rolling closing costs or cash out into the new loan raises what you owe.
- How long you'll stay: If you sell or refinance again before the break-even point, the costs may not be recovered.
- Mortgage insurance and escrow: A refinance can remove PMI or add new mortgage insurance, and escrow accounts may need new funding.
Compare the Loan Estimate for the new loan with your current loan's remaining balance, rate, and term before deciding.
Related tools and guides
This calculator provides estimates for educational purposes only. It is not a recommendation to refinance and is not financial advice. See our disclaimer.