Phase 2 · Wealth & Leverage
Mortgage Refinance Breakeven Calculator
A lower rate isn't a free lunch — closing costs come first. Find the month you break even, your new payment, and the real lifetime savings, so you refinance on the math, not the headline.
Under the hood
The math, fully exposed
We amortize the same balance at both rates over the same term, then race savings against costs:
Payment = balance × r(1+r)n ⁄ ((1+r)n−1) (at each rate)
Monthly savings = current payment − new payment
Break-even months = closing costs ÷ monthly savings
Net lifetime savings = monthly savings × months left − closing costs
- Break-even is the decision: stay past it and the refinance wins; leave before it and the closing costs were a loss.
- Same term, fair fight: comparing over equal remaining years strips out the illusion of a lower payment that just re-stretches the loan.
- No savings if the rate isn't lower: a new rate at or above your current one can't break even — the costs never come back.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
When does refinancing actually pay off?
When you stay in the home past the break-even point — the month where your accumulated monthly savings finally cover the closing costs of the new loan. If closing costs are $6,000 and you save $200 a month, you break even at 30 months; sell or refinance again before then and you lose money on the deal. The lower rate is only worth it if you hold the loan long enough.
How is the break-even calculated?
Break-even months = closing costs ÷ monthly payment savings. We amortize your current balance at both the old and new rates over the same remaining term, take the difference in monthly payment, and divide the closing costs by it. Keeping the term constant is what makes it a fair comparison — otherwise a longer new term can show "savings" that are really just stretched-out debt.
Does a lower payment always mean I am saving?
No — and this is the most common refinance trap. Resetting a 22-years-in loan back to a fresh 30 years lowers the monthly payment but can add tens of thousands in total interest, even at a lower rate. The honest measures are the break-even month and the total interest over the same payoff horizon, both of which this tool shows. A lower payment with a longer term is cash-flow relief, not necessarily savings.
What counts as closing costs on a refinance?
Lender origination or points, appraisal, title insurance, recording and other fees — typically 2–5% of the loan amount. Some lenders offer "no-cost" refinances that fold the fees into a higher rate or the balance, which moves the cost rather than removing it. Enter your real, all-in closing costs for an honest break-even. This is an educational model, not financial advice.