Refinancing your mortgage costs money up front (closing costs of 2-4% of the loan) — but a lower rate saves money each month. The question is: how long does it take for the monthly savings to recoup the closing costs? That’s the break-even point. If you sell before break-even, you lose money on the refi. If you stay long after, you profit. This calculator computes the exact break-even point and gives a yes/no verdict based on how long you actually plan to stay.
Refinance Break-Even Calculator
When does the rate drop pay off the refi closing costs? Run the math before you commit.
Break-even point
—
When refi closing costs are recouped via monthly savings.
Current payment
$0
New payment
$0
Monthly savings
$0
Lifetime savings (if stay)
$0
Adjust the inputs to see whether refinancing pays off.
Estimates only. Real refinance closing costs vary by state and lender. Get a Loan Estimate from 3 lenders before refinancing.
How break-even works
The math is simple in concept:
Break-even months = Refi closing costs ÷ Monthly payment savings
Example: closing costs of $6,000, monthly savings of $300 = 20 months to recoup. Stay 20+ months past the refinance and you come out ahead. Move before 20 months and you’ve lost money on the refi.
What the calculator captures
- Current monthly P&I based on your existing balance, rate, and remaining term
- New monthly P&I based on the new rate and term (typically a fresh 30-year)
- Monthly savings = current − new
- Break-even months = closing costs ÷ monthly savings
- Lifetime savings if you stay your planned horizon
What the calculator doesn’t capture (worth thinking about)
1. The term reset
If you refinance from a 30-year mortgage that’s already 5 years in to a fresh 30-year, you’ve extended your payoff by 5 years. Total interest paid over the life of the loan may be higher even at a lower rate because you’re paying interest for longer.
Fix: refinance to a shorter term (20 or 25 years) to match what’s left on your current loan. Your monthly payment will be slightly higher but lifetime interest will be lower.
2. Opportunity cost on closing costs
The $6,000 you spend on refi closing costs could earn 5%+ in a savings account. Over the typical 20-month break-even, that’s $500-$700 in foregone interest. Small but real.
3. PMI cancellation
If your home has appreciated enough that you’d cross 80% LTV with a new appraisal, refinancing can drop PMI (typically $100-$300/month) — sometimes worth refinancing even at a similar rate just for the PMI savings.
4. Tax deduction impact
A lower rate = less mortgage interest paid = smaller itemized deduction. For households that itemize (most don’t post-2017 TCJA), this slightly offsets the savings.
When refinancing makes sense in 2026
Yes: rate drop ≥ 0.75%, staying 3+ more years, closing costs reasonable, can match remaining term.
Yes (no-brainer): PMI cancellation triggered by appreciation, even at a similar rate.
Yes: ARM about to reset to a higher rate — lock in fixed.
Yes: debt consolidation from 20%+ credit cards into a 7% mortgage rate.
When refinancing doesn’t make sense
No: rate drop under 0.5% AND moving within 3 years.
No: restarting a 30-year clock when you’re 10+ years into your current loan (unless you commit to extra principal to maintain payoff date).
No: cash-out for consumption (vacation, lifestyle).
No: if your credit score dropped significantly since origination — your new quoted rate may be higher than today’s market rate even when rates fall.
How to shop for a refinance
- Get three Loan Estimates within 14 days of each other (same credit pull). Federal law requires lenders to provide one within 3 business days of application.
- Compare the APR, not just the rate. APR includes most closing costs.
- Verify the rate-lock period — locks of 30, 45, or 60 days are common; longer locks cost slightly more in rate.
- Negotiate origination and discretionary lender fees — they’re closeable. Title insurance is closeable in non-regulated states. Appraisal and government recording are not.
- Pay points only if you’ll keep the loan past the break-even for the points themselves (typically 5+ years).
Related calculators and reading
- Refinance Break-Even (Article Guide) — full 1,500-word guide
- Mortgage Payoff Calculator — combine refi with extra principal
- Closing Cost Calculator — state-specific refi closing cost estimate
- HELOC vs Cash-Out Refinance Calculator — sometimes a HELOC is better than refi
- All Calculators
Estimates based on standard amortization math. Real lender pricing varies. Not financial advice.