Refinance break-even calculator
See how many months it takes for a lower monthly payment to pay back your closing costs, so you know whether a refinance is really worth it.
Break-even point
18 mo
- Current principal and interest
- $2,306
- New principal and interest
- $1,970
- Monthly difference
- $336
- Closing costs
- $6,000
Estimate only, for illustration. Your actual rate, payment and costs depend on your credit, loan program, property and market conditions. Not an offer to lend.
Get my real numbersHow the break-even calculator works
A refinance replaces your current loan with a new one. It costs money up front, so the question is how long it takes for the monthly savings to pay those costs back. The calculator compares your current principal and interest with the new principal and interest on the same balance, then divides your closing costs by the monthly difference. The result is your break-even point in months.
Reading the result
- If you plan to stay in the home longer than the break-even point, the refinance generally pays for itself.
- If you might move or refinance again before then, it may not be worth it.
- Resetting to a new 30 year term can lower the payment while adding years of interest, so compare total cost, not only the monthly number.
Other reasons to refinance
Lowering the rate is not the only reason. Homeowners also refinance to drop mortgage insurance, shorten the term, switch from an adjustable to a fixed rate, or take cash out for improvements or debt payoff. VA borrowers may qualify for an IRRRL streamline, and FHA borrowers for an FHA streamline, which can reduce paperwork.
Common questions
When does refinancing make sense?
When the monthly savings recover your closing costs before you expect to sell or refinance again, or when the new loan meets a goal like removing mortgage insurance, shortening the term or getting cash out. The break-even point above is the quickest test.
What are typical refinance closing costs?
They vary by loan size, program and state, and include lender fees, title, appraisal and prepaid items like interest and escrow. Ask for a Loan Estimate, which lists every cost, so you can plug the real number into the calculator.
Does a refinance restart my loan term?
It can. Many people refinance into a new 30 year loan, which lowers the payment but extends the payoff date. You can also choose a shorter term, like 20 or 15 years, to keep your payoff date on track.
Can I refinance with a VA or FHA loan?
Yes. VA borrowers may use an Interest Rate Reduction Refinance Loan (IRRRL), and FHA borrowers may use an FHA streamline. Both are designed to lower the rate with less documentation than a full refinance, subject to program rules.
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