How to use the refinance break-even calculator
Enter your current mortgage balance, current rate and remaining term, then enter the proposed refinance rate and term along with estimated closing costs. The tool compares principal-and-interest payments and divides upfront costs by monthly payment savings when the new payment is lower.
Look beyond the monthly payment
A lower payment does not automatically mean a lower total cost. A new loan with a longer term can reduce the monthly amount while extending repayment and increasing total interest. Compare the time you expect to keep the home or loan with the estimated break-even point.
Review fees and loan terms
Use actual Loan Estimates when available. Compare interest rate, APR, points, lender credits, upfront costs, cash to close, and the total payment. CFPB guidance explains that advertised “no-cost” refinancing may involve a higher rate or closing costs added to the loan.
What this estimate leaves out
This calculator assumes fixed-rate loans and treats the refinance costs you enter as paid up front. It compares principal and interest only; it does not model taxes, insurance, escrow, mortgage insurance, points, tax effects, cash-out proceeds, costs financed into the loan, or a change in home value. Confirm the full costs and terms in current lender documents.
Frequently asked questions
How is refinance break-even calculated?
This calculator divides estimated upfront closing costs by the monthly principal-and-interest payment reduction, when the new payment is lower. It does not account for every cost or the value of time.
What if the new payment is higher?
There is no payment-based break-even in this estimate. A refinance could still serve another goal, but compare costs and terms carefully.
Why does the new loan term matter?
A longer term can reduce the monthly payment by spreading repayment over more months, while potentially increasing total interest and changing how quickly you build equity.
Does the result include taxes and insurance?
No. It compares principal and interest only. Property taxes, homeowners insurance, mortgage insurance, escrow, points, tax effects, and costs added to the loan are not modeled.
Sources and related guidance
- Consumer Financial Protection Bureau: Compare and negotiate loan offers
- CFPB: No-cost or no-closing-cost refinancing
Related tools: Use this calculator again, browse all money guides, or learn how My Clear Money builds its estimates.