Refinance Break-Even Calculator

Break-even is closing costs divided by your monthly payment savings. If a refinance saves you $200 a month and costs $4,000 in closing costs, you break even at month 20. That's when your savings have covered what you paid to refinance, and every month after that is money you keep. The calculation assumes you keep the new loan and don't refinance again. Some calculators also compare lifetime interest, but closing costs divided by monthly savings is the method most lenders quote.

A break-even under 24 months is generally strong, 24 to 48 months is solid, and anything past 60 months starts to get questionable. The real test is how it compares to how long you plan to stay in the home. If you'll be there 10 or more years, even a 48-month break-even leaves you with 6 years of savings. If you might move in 4 years, you want break-even well under 36 months. Use your honest expected stay, not a wishful number.

Rarely for rate savings alone. With closing costs often running $3,000 to $6,000 on a Texas refinance, you need monthly savings of $125 to $250 just to break even within 24 months, and that takes a meaningful rate drop on a meaningful balance. If break-even lands in month 20 and you move in month 24, you keep only 4 months of savings. There are exceptions: a no-closing-cost refinance (fees covered in exchange for a slightly higher rate) can make sense for short horizons, and so can dropping PMI or removing a co-borrower. VA borrowers can look at a VA IRRRL and FHA borrowers at an FHA streamline refinance.

Yes, and it's common on refinances. Instead of paying $4,000 out of pocket at closing, that amount is added to your new loan balance. The trade-off is that you pay interest on those costs for the life of the loan, and your break-even needs to account for the slightly higher payment. Some lenders also offer no-closing-cost refinances where they absorb fees in exchange for a rate roughly 0.25% to 0.50% higher, which can work if you may not stay in the home long.

No. The standard break-even formula doesn't account for resetting your amortization clock. When you refinance into a new 30-year loan, you restart at a payment weighted toward interest for the first several years. Even if your monthly payment drops, you may pay more interest over the life of the loan and build equity more slowly than if you'd kept your original mortgage. This calculator shows cash-flow break-even and also compares total interest on both loans, so check that tile if you're 10 or more years into your current loan.