Refinance Calculator: Break-Even Point

For every month, the calculator adds up what each choice has cost you so far — every payment, plus the refinancing costs for the new loan — and what you would still owe. Refinancing breaks even in the first month from which that total is lower than keeping your current loan, and stays lower.

That quick rule is shown too, but it can mislead. If you swap 25 years left on your loan for a new 30-year term, the payment falls partly because you are repaying the balance more slowly, not only because the rate is lower. The quick rule counts that as a saving; the full comparison counts what you still owe.

When does refinancing pay off? The break-even point explained

It can be, if the costs are low and you keep the loan long enough to pass the break-even point. If you might sell or refinance again before then, the costs are likely to outweigh the savings. Entering how long you expect to keep the loan shows the result at that point.

A new 30-year term gives the lowest payment, but it restarts the clock and can raise the total interest you pay even at a lower rate. Choosing a term close to the years you have left keeps your payoff date and usually saves the most interest. Compare both by changing the new loan term.

Taxes, mortgage insurance, and cash-out refinancing are not modeled, and the refinancing costs are assumed to be paid in cash rather than added to the loan. Money is not discounted for when it is paid, which slightly favours options whose costs come later.