United States · 2026 calculator

Mortgage Refinance Break-Even Calculator

Compare your current mortgage with a proposed refinance, including closing costs, break-even month and lifetime savings.

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What this calculator explains

A lower monthly payment does not automatically mean a refinance saves money. The payment may fall because the interest rate is lower, the term is longer, or both. This calculator distinguishes payment cash-flow break-even from borrowing-cost break-even and compares remaining balances and interest over the selected holding period.

Closing costs can be paid in cash, added to the loan or reflected in a higher rate. The selected treatment is displayed clearly, and cash-out proceeds are kept separate from genuine savings.

How the estimate is calculated

  1. Project the remaining payment and interest path of the current mortgage.
  2. Add financed closing costs and cash-out to the proposed new principal where selected.
  3. Calculate the new payment and amortization schedule.
  4. Find the first month cumulative payment differences recover upfront fees, stopping payments when each mortgage is paid off. Separately find when cumulative interest savings cover all closing costs.
  5. Calculate cumulative net savings for the user’s expected holding period.
  6. Compare remaining balances at the end of the horizon. Net borrowing-cost savings equal interest saved less closing costs; fees are counted once, and cash-out principal is not income or savings.

Formula

Net borrowing-cost savings = current-loan interest to date − new-loan interest to date − closing costs. Payment cash-flow savings = current-loan payments to date − new-loan payments to date − upfront fees.

Worked example

If refinancing reduces the monthly payment from $2,400 to $2,150, the monthly difference is $250. With $6,000 of upfront closing costs, the simple break-even is $6,000 ÷ $250 = 24 months. The user should still compare total interest and the new payoff date because a longer term can increase lifetime cost.

Rules and assumptions

  • While both scheduled payments continue, upfront costs divided by positive monthly payment savings gives a simple cash-flow recovery estimate. The calculator uses the actual payment schedules, including their different payoff dates.
  • The full comparison must also show financed costs, a reset loan term, cash-out, remaining balances and total interest.
  • A lower monthly payment can still produce a higher lifetime cost.

Included in the estimate

  • Current and proposed amortization schedules
  • Upfront or financed closing costs
  • Separate payment cash-flow and borrowing-cost break-even months
  • Holding-period net savings
  • Cash-out and financed-fee scenarios
  • Remaining-balance and lifetime-cost comparison

Not included or not guaranteed

  • A lender rate quote or approval
  • Tax consequences of mortgage interest
  • Existing-loan prepayment penalties and mortgage-insurance changes
  • Property appraisal or title requirements
  • A recommendation that refinancing is suitable

What is refinance break-even?

Payment cash-flow break-even recovers upfront costs from payment differences. Borrowing-cost break-even recovers all closing costs from interest savings. They can differ when the term or balance changes; a first break-even can reverse later, so also check the holding-period result.

Should financed closing costs count?

Yes. Financing costs increases the new principal and affects both payment and total interest even when no cash is paid at closing.

What if the new payment is lower because the term is longer?

The calculator stops each loan’s payments at payoff and compares remaining debt, holding-period borrowing costs and lifetime interest. A lower payment does not necessarily mean lower costs.

How long should I plan to stay in the home?

Use the period you reasonably expect to keep the mortgage. Selling, moving or refinancing again before break-even can eliminate projected savings.

Does cash-out refinancing save money?

Cash-out serves a separate borrowing goal. Compare the new debt and total interest rather than treating cash received as a saving.

Should I compare APR or rate?

Use the payment rate in the amortization model and include fees separately. APR can help compare offers but is not itself the monthly payment rate.

Official sources

Applicable period: 2026 · Last reviewed: September 3, 2026

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