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Refinance Break-Even Calculator

Compare your current mortgage with a refinance: new payment, monthly savings, the simple break-even lenders quote, the true break-even that counts your remaining balance, and what a term reset really costs in total interest.

Current loan

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%
yrs
mo

Current principal & interest works out to $0/month (taxes, insurance and escrow are not included — they do not change when you refinance).

New loan

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For context, Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed average at 7.03% as of September 24, 2026 (source; static reference, not a live feed).

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typically 2–5% of the loan; enter the lender’s estimate
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How this calculator works

Both loans use the standard amortization formula for a fixed monthly principal & interest payment:

M = P · r(1 + r)n / ((1 + r)n − 1)
  • P = loan amount (your remaining balance now; for the new loan, the balance plus any cash-out and any closing costs you roll in)
  • r = monthly interest rate (annual rate ÷ 12 ÷ 100)
  • n = number of payments left (years × 12)

Your current payment is computed from the balance, rate and remaining term you enter, so it is the principal-and-interest portion only. Escrow items (property tax, insurance) are the same either way and are left out. For the full payment on a new purchase, use the mortgage calculator.

Simple vs true break-even

The simple break-even is closing costs ÷ monthly saving. It is the figure most lenders quote, and it answers only one question: how long until the lower payment has covered the fees. It ignores the fact that the two loans pay down principal at different speeds.

The true break-even walks both amortization schedules month by month and asks a stricter question: at which month would you be better off if you sold or paid off the house? For each month it adds up the payments saved so far and the difference in what you still owe, credits any cash-out you received, and subtracts the closing costs. The first month that total turns positive is the true break-even. Because a longer new term pays principal down more slowly, the true break-even is usually later than the simple one — and when the term reset is large relative to the rate drop, it may never arrive, even though the payment is lower every month.

Why the term reset matters

Refinancing 22 years of remaining mortgage into a new 30-year loan adds eight years of payments. Part of the lower payment comes from the lower rate — a real saving — and part comes from spreading the same balance over more months, which is not a saving at all. The calculator shows the total interest on each path and, separately, how much of the new loan’s interest comes purely from the longer term, by comparing against a refinance over your current remaining term at the new rate. When the refinance lowers the payment but raises total interest, the results say so plainly.

Worked example

A $350,000 balance at 7.25% with 26 years left costs about $2,496/month in principal & interest. Refinancing to 6.25% over a new 30 years with $7,000 in closing costs paid upfront gives a new payment of about $2,155, saving $341 a month. The simple break-even is 21 months; the true break-even, counting the slower principal paydown, is 25 months. Over the life of each loan, total interest is about $428,600 if you stay and $425,800 if you refinance — only about $2,800 less, because four extra years of payments eat almost all of the rate saving. The term reset alone adds roughly $66,900 of interest compared with refinancing over the same 26 years, which would cost about $2,272/month and still save $224 a month.

Now shorten the current loan: a $200,000 balance at 6.5% with 10 years left, refinanced to 6.25% over 30 years with $6,000 in costs. The payment drops by more than $1,000 a month and the simple break-even is a tempting 6 months — yet the true break-even is never, and you pay about $170,800 more total interest. Lower payment, far higher cost.

When refinancing usually does not pay

  • You plan to move or sell before the true break-even month. You pay the closing costs but never collect the savings.
  • The rate gap is small. A quarter- or half-point drop on a modest balance can take five years or more to recoup the fees.
  • You are well into the loan. With ten or fifteen years left, most of each payment is already principal; a new 30-year loan restarts the interest-heavy years.
  • You are refinancing to pull cash out at a higher rate than your current loan, which raises the cost of your whole balance to fund the cash-out.

Tips

  • Ask for a refinance over your remaining term (or 20 or 15 years) and compare it with the 30-year quote here.
  • Get loan estimates from at least three lenders on the same day; closing costs vary as much as rates do.
  • If you can afford it, keep paying your old payment amount on the new loan — the extra goes to principal and erases most of the term reset.
  • Deciding on a home rather than a refinance? Start with how much house can I afford.
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Frequently asked questions

What does the refinance break-even point mean?

It is the month when the savings from refinancing have paid back the closing costs. The simple version most lenders quote divides closing costs by the monthly payment saving. The true version on this page also counts your loan balance: a new loan with a longer term pays down principal more slowly, so you owe more at any given month than you would have on the old loan. The true break-even is the first month you would come out ahead if you sold or paid off the house, counting both what you have paid and what you still owe.

Is a 1% rate drop worth refinancing for?

Often, but not automatically. A 1-point drop on a large balance can save a few hundred dollars a month, which typically recoups 2–5% closing costs within two to three years. It is a weaker case when the balance is small, you plan to move before the break-even month, or you have only a few years left on the current loan — in that last case, resetting to 30 years can cost more total interest even at a lower rate. Run your actual numbers rather than relying on a rule of thumb.

Should I roll closing costs into the loan or pay them upfront?

Rolling costs into the new loan means no cash at closing, but you borrow the costs and pay interest on them for the life of the loan, and your monthly savings shrink slightly. Paying upfront gives the larger monthly saving and lower total interest, if you have the cash. Tick the “roll closing costs into the new loan” box to compare both ways at your numbers.

How does a cash-out refinance change the math?

A cash-out refinance adds the cash you take to the new loan balance, so the new payment and total interest rise, and the monthly saving compared with your current loan shrinks or turns into an increase. The calculator credits the cash you receive when it works out the true break-even, but treat cash-out as new borrowing: it is only cheap if the rate is lower than the alternative you would otherwise use for that money.

Does refinancing reset the clock on my mortgage?

Yes, unless you choose a term that matches your remaining years. If you have 22 years left and take a new 30-year loan, you have added eight years of payments. The payment falls partly because of the lower rate and partly because the balance is spread over more months — and the second part is not a saving. The “extra interest from the term reset” line shows how much of the total interest comes purely from the longer term; many lenders offer 20-, 15-, or custom-term refinances that avoid it.