How to use this calculator
- Current loan: your remaining balance, interest rate and years left. You’ll find these on your mortgage statement.
- New loan: the rate you’re quoted and the new term.
- Closing costs and points: lender, appraisal and title fees from your Loan Estimate. Points are entered as a percentage of the new loan.
- Pay costs: choose whether you’ll pay them at closing or add them to the new loan.
- Cash out (optional): extra money you take from your equity.
Payments compared here are principal and interest only. Property tax and insurance don’t change when you refinance, so they don’t affect the savings.
How the break-even is calculated
The common shortcut divides your costs by your monthly savings:
That works for a like-for-like refinance. But when the new loan is longer, bigger or includes the closing costs, a lower payment can come partly from paying down principal more slowly. So the calculator also tracks your full position each month:
Net savings = payments saved − costs paid at closing + cash received + (balance you’d still owe on the old loan − balance on the new loan)
You’ve broken even in the first month this turns positive. The chart plots it year by year, and the final value is the lifetime saving after both loans are fully paid. Both numbers appear in the comparison table.
Worked example
You owe $300,000 at 7.5% with 27 years left, so your payment is $2,162.20. A lender offers 6.25% on a new 30-year loan with $6,000 in closing costs, paid in cash.
- New payment: $1,847.15, a saving of $315.05 a month.
- Simple break-even: $6,000 ÷ $315.05 ≈ 20 months. The full calculation also lands on month 20.
- Interest left on the current loan: $400,553. Interest on the new loan: $364,975.
- Lifetime: you pay $700,553 on the current loan versus $670,975 for the new one including costs, a saving of $29,579.
The chart rises for about 21 years, then falls: in its last years the old loan would be shrinking fast and then end, while the new one still has three more years of payments. That’s the cost of restarting the clock.
How much the rate drop matters
Same $300,000 balance, 27 years left at 7.5%, new 30-year loan, $6,000 costs:
| New rate | Monthly savings | Break-even | Lifetime result |
|---|---|---|---|
| 7.00% | $166.29 | month 53 | $23,973 more |
| 6.75% | $216.41 | month 34 | $5,933 more |
| 6.50% | $266.00 | month 25 | $11,920 saved |
| 6.25% | $315.05 | month 20 | $29,579 saved |
| 6.00% | $363.55 | month 17 | $47,039 saved |
| 5.75% | $411.48 | month 14 | $64,295 saved |
A half-point drop pays back within about four and a half years, but over the full term the three extra years wipe out the savings. Old rules of thumb about needing a drop of one or two points ignore your costs, your loan size and how long you’ll stay; it’s better to run your own numbers.
Choosing a term
Keeping the term close to what you have left gives the cleanest saving. At 6.25% on a 25-year loan, the payment is $1,979.01 ($183.19 lower), break-even comes in month 19, and lifetime savings jump to $100,851. A 15-year loan at the same rate raises the payment by $410.07, but you’d pay just $163,008 in interest, saving $231,545 over the life of the loan if you can carry the higher payment. To see how any term amortizes, try the amortization calculator.
Points, rolled-in costs and cash out
- Points: paying 1 point ($3,000) for 6% instead of 6.25% stretches break-even to 25 months but raises lifetime savings to $44,039.
- Rolling in costs: adding the $6,000 to the loan makes it $306,000. Monthly savings fall to $278.11, break-even moves to month 22 and lifetime savings to $22,279.
- Cash out: taking $40,000 makes the new loan $340,000. The payment drops only $68.76, and after counting the cash you receive, the refinance costs about $19,085 more over its life. If you only need a smaller sum and your current rate is low, a home equity loan or a HELOC may cost less because your first mortgage stays untouched.
Before you refinance
- Get Loan Estimates from several lenders. The standard form makes fees easy to compare line by line. Our closing cost calculator shows what typical items look like.
- Compare APRs as well as rates: the APR folds in points and fees.
- Check for a prepayment penalty on your current loan.
- Be honest about how long you’ll stay. If you might move before the break-even month, refinancing loses money.
Assumptions and limitations
Both loans are fixed-rate with monthly payments; balances use the standard amortization formula. The calculation ignores taxes (including any change in deductible mortgage interest), the time value of money and escrow refunds or new escrow deposits at closing. Cash-out proceeds are counted at face value.
Sources
- Consumer Financial Protection Bureau: Loan Estimate explainer
- Consumer Financial Protection Bureau: What is a prepayment penalty?
This calculator is for planning only and isn’t financial advice. Your lender’s Loan Estimate shows the actual terms.
Frequently asked questions
When is refinancing worth it?
When you'll keep the new loan longer than it takes to recover the closing costs, and the total cost over the life of the loan goes down. A lower rate alone isn't enough. In our example, cutting the rate from 7.5% to 6.25% on $300,000 saves $315 a month and breaks even in 20 months, but dropping only to 7% takes 53 months and costs more over the full term.
How do you calculate the refinance break-even point?
The quick version is closing costs divided by monthly savings. $6,000 of costs and $315 a month in savings gives about 20 months. This calculator also tracks how fast each loan's balance falls, which matters when the new loan is longer or larger, and reports the month you're actually ahead.
Does refinancing to a new 30-year loan cost more?
It can. Restarting a 30-year clock on a loan with 27 years left adds three years of payments. At 6.25% instead of 7.5% you still save overall in our example, about $29,600, but at 7% the longer loan costs about $24,000 more in total even though the monthly payment drops.
Should I pay points to get a lower rate?
Points are prepaid interest, usually 1% of the loan per point. They make sense if you'll keep the loan long enough for the lower payment to repay them. In our example, one point for 6% instead of 6.25% costs $3,000 more upfront and stretches break-even from 20 to 25 months, but adds about $14,500 to lifetime savings.
Is it better to roll closing costs into the loan?
Rolling costs in means less cash at closing but a bigger loan, so you pay interest on the costs for decades. In our example, financing $6,000 cuts the monthly savings from $315 to $278 and lowers lifetime savings by about $7,300. Paying in cash is cheaper if you have the savings to spare.
How does a cash-out refinance affect the math?
The new loan is bigger, so the payment and total interest rise. The calculator counts the cash you receive as a benefit, so the comparison shows the true cost of borrowing it. Taking $40,000 out in our example turns $29,600 of lifetime savings into about $19,100 of extra cost.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.