Refinance breakeven calculator
How many months it takes to recoup your closing costs, and whether you come out ahead over the life of the loan.
How the breakeven is calculated
A refinance costs money up front and saves money every month. The breakeven point is where those two meet. The tool takes your current loan, your proposed new loan and your closing costs, and shows how many months it takes to recoup the cost — and, just as important, whether you come out ahead over the life of the loan.
Everything here runs in your browser from two standard amortization formulas. Nothing you type is sent to us.
The monthly payment
Both the current and the new principal-and-interest payments use the fixed-rate amortization formula:
M = P × [ r(1+r)n ] / [ (1+r)n − 1 ]
where P is the balance, r is the monthly rate (annual rate ÷ 12), and n is the number of months.
Cash-flow breakeven
Your monthly savings is your current P&I minus your new P&I. The cash-flow breakeven is simply:
breakeven months = closing costs ÷ monthly savings
If you plan to stay in the home longer than that, the refinance recoups its cost and then saves you money each month. If you'll move sooner, you'd sell before the savings caught up with the upfront cost.
Total-cost (lifetime) breakeven — the part most calculators skip
A lower monthly payment is not the same as paying less money. When you refinance, you usually reset the clock — trading, say, 24 years left into a fresh 30-year term. That lower payment can still add interest over the full life of the loan. So alongside the monthly view we show the lifetime interest difference (new total interest minus what you'd have paid on your current loan) and the lifetime cost difference (every new payment plus closing costs, versus every remaining payment on your current loan).
The healthy case is when both agree: you break even quickly and pay less over the life of the loan. When they disagree — fast cash-flow breakeven but a higher lifetime cost — you're buying lower monthly payments with more total interest. That can be the right call if cash flow is the goal, but you should make it on purpose. To capture only the rate benefit without extending your term, set the new term close to your remaining months.
What we deliberately leave out
- Property tax, insurance, and HOA. On a rate-and-term refinance these are the same under either loan, so they don't move the breakeven.
- PMI. It can change with the new loan: mortgage insurance is priced on the new loan-to-value, so it can drop off or appear. The full calculator counts it from your home value.
- Income-tax effects. Since the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, most homeowners no longer itemize, so the mortgage-interest deduction is irrelevant to their after-tax cost. We leave it out to keep the number honest for the typical borrower; if you itemize, adjust with your tax advisor.
- Points and lender credits beyond what you enter as closing costs. Fold discount points into your closing-cost figure if you're paying them.
These are estimates for education, not a quote or personalized advice. Verify every figure against your Loan Estimate. See our editorial policy.
Common questions
What is a refinance breakeven point?
It's the month at which your accumulated monthly savings equal what you paid in closing costs. Before that month you're still recouping the upfront cost; after it, the refinance is ahead on a cash-flow basis.
How is cash-flow breakeven different from total-cost breakeven?
Cash-flow breakeven only asks when your monthly savings repay your closing costs. Total-cost breakeven asks whether you pay more or less over the entire loan. A refinance can pass the first test and fail the second, because resetting the term can add interest even while the payment drops.
Does this calculator include PMI, taxes, and insurance?
No — on purpose. Those costs are identical under either loan in a rate-and-term refinance, so they don't change the breakeven. Use the full refinance calculator for a complete PITI estimate.
What closing-cost figure should I enter?
Freddie Mac puts typical refinance closing costs at 3–6% of the loan principal. If you don't have a Loan Estimate yet, build an itemized figure in the closing costs calculator: it prices each fee for your state and passes the total here.
Why is my breakeven different from my lender's estimate?
Lenders sometimes quote breakeven using only the payment drop and their own fee sheet, or fold points and credits in differently. Enter your actual Loan Estimate closing costs here to compare on the same basis.
Does the 2% rule for refinancing still hold?
The 2% rule says to refinance only when the new rate is at least two percentage points below the current one. It is a rule of thumb, not a lender or regulatory standard, and it ignores the two numbers that decide the answer: closing costs and how long you keep the loan. On a new 30-year loan of $325,000, the monthly payment is about $218 lower at 6.5% than at 7.5%. With $5,338 in closing costs (the closing costs calculator's California estimate for that loan), that pays back in about 25 months, so a one-point drop can be worth it if you keep the loan longer than that. The breakeven month above gives the answer for your own numbers; the closing costs calculator builds the cost figure line by line and passes it here.
Does a lower monthly payment always save money?
No. Refinancing a loan with 24 years left into a fresh 30-year term can lower the payment yet raise total interest. That's why this tool shows the lifetime interest difference next to the monthly savings.
Are income-tax effects included?
No. After the 2017 Tax Cuts and Jobs Act most homeowners take the standard deduction, so the mortgage-interest deduction changes the math for only a minority. We leave it out for the typical case; itemizers can adjust with an accountant.
Related tools
- Full refinance calculator — complete PITI, cash-out, FHA/VA, state-specific costs.
Want the full picture?
The complete refinance calculator adds taxes, insurance, PMI, and state-specific closing costs to your estimate.