People type this into search every day: mortgage refinance break even calculator.
The usual answer is “when the new payment is lower.” That is only the start. You still have to earn back the cash you paid to close the new loan.
This page is a labeled example. It is not a Loan Estimate, and it is not personalized financial advice.
Recover the closing costs first
The CFPB Should I refinance? handout is blunt. Refinancing pays off the current mortgage with a new one. You can go through many of the same steps and pay many of the same costs. If you plan to move in the next few years, you might not have time to recoup those costs.
The Federal Reserve Consumer’s Guide to Mortgage Refinancings says it is not unusual to pay 3 percent to 6 percent of outstanding principal in refinancing fees. Those sit on top of any prepayment penalty.
A “no-cost” refinance is usually not free. The CFPB no-cost refinance note gives the two common trades. The lender raises the rate and credits the fees, or the fees are added to the loan balance. A higher rate costs more over time. A larger balance raises the payment and cuts equity.
Compare the offers on a Loan Estimate. The CFPB compare page tells you to look at the monthly principal and interest, the total loan costs, lender credits, and cash to close.
The mortgage refinance break-even calculator uses this formula:
refinancing costs ÷ monthly payment saving
Then it rounds up to the next whole month. Compared payments should cover the same cost pieces. Loan-balance changes and tax effects stay out. Those are the tool’s assumptions.
Fig 1
Saving first, then the months
The new payment has to be lower or there is no break-even
Subtract the new payment from the current one. Divide the closing costs by that saving. Round up.
Freddie Mac’s Primary Mortgage Market Survey is the place to read this week’s 30-year and 15-year averages. The numbers below are labeled calculator runs, not a quote for your loan.
Example 1: the published $220 saving
Here are the calculator defaults:
- current monthly payment: $2,200
- new monthly payment: $1,980
- refinancing costs: $5,200
Monthly saving: 2200 − 1980 = $220.00
Months: 5200 ÷ 220 = 23.636…, rounded up to 24 months
Five-year saving after costs: 220 × 60 − 5200 = $8,000.00
Calculator result
Mortgage refinance break-even
- Current monthly payment
- $2,200.00
- New monthly payment
- $1,980.00
- Refinancing costs
- $5,200.00
24 months
to recover refinancing costs
- Monthly saving
- $220.00
- Five-year saving after costs
- $8,000.00
After 23 months you have recovered $5,060. The last $140 lands in month 24. Stay 24 months and the costs are back. Leave earlier and the refinance is still a net cash loss on this measure.
Fig 2 · 1/2
The first 24 months
Defaults: $220 saved, $5,200 to recover
Costs recovered
$5,200.00
First surplus
$80.00
Closing costs are $5,200.00 of the first $5,280 you save.
The leftover $80.00 in month 24 is the first dollar ahead.
Fig 3 · 1/6
Cash position after the $5,200
Defaults. Cumulative $220 saving minus costs.
Saving minus costs
- After costs
| Point | After costs |
|---|---|
| 0 | -$5.2k |
| 12 | -$2.6k |
| 24 | $80 |
| 36 | $2.7k |
| 48 | $5.4k |
| 60 | $8.0k |
Month 12 is still $2,560.00 behind.
Month 24 is $80.00 ahead. Month 60 is $8,000.00 ahead.
Example 2: a $100 cut on the same costs
Keep the $2,200 current payment and the $5,200 costs. New payment $2,100.
Monthly saving: $100.00
Months: 5200 ÷ 100 = 52 months
Five-year saving after costs: 100 × 60 − 5200 = $800.00
Calculator result
Mortgage refinance break-even
- New monthly payment
- $2,100.00
52 months
to recover refinancing costs
- Monthly saving
- $100.00
- Five-year saving after costs
- $800.00
Four years and four months is a long stay for an $800 five-year leftover.
Example 3: a $400 cut
New payment $1,800. Same $2,200 and $5,200.
Monthly saving: $400.00
Months: 5200 ÷ 400 = 13, already a whole number, so 13 months
Five-year saving after costs: $18,800.00
Fig 4 · 1/3
Three savings, one $5,200 bill
Current payment stays $2,200
- Months to recover
| Category | Months to recover |
|---|---|
| $100 / mo | 52 |
| $220 / mo | 24 |
| $400 / mo | 13 |
A $100 cut needs 52 months. A $220 cut needs 24.
A $400 cut is back to even in 13 months.
Example 4: the costs rise to $8,000
Keep the default $220 saving. Raise closing costs to $8,000.
Months: 8000 ÷ 220 = 36.36…, rounded up to 37 months
Five-year saving after costs: 220 × 60 − 8000 = $5,200.00
The monthly cut did not change. The wait did.
Example 5: the costs fall to $3,000
Months: 3000 ÷ 220 = 13.636…, rounded up to 14 months
Five-year saving after costs: $10,200.00
Fig 5 · 1/3
Same $220, three cost piles
Defaults, then $3,000 and $8,000 closing costs
Months to recover
$3,000 costs
14 mo
$5,200 costs
24 mo
$8,000 costs
37 mo
$3,000 of costs recovers in 14 months.
$8,000 of costs recovers in 37 months.
Example 6: what if you move in 18 months
A different pair, still labeled:
- current payment: $2,400
- new payment: $2,100
- costs: $6,500
Monthly saving: $300.00
Months: 6500 ÷ 300 = 21.666…, rounded up to 22 months
Sell in month 18 and you have recovered 300 × 18 = $5,400.00. That is $1,100.00 short of the $6,500. The CFPB handout’s “planning to move soon” box is this gap.
Example 7: the common mistake, a higher new payment
Someone refinances from 30 years at 6.25% to 15 years and compares only the term.
The mortgage payment calculator on its $336,000 default loan prints $2,068.81 at 6.25% for 30 years and $2,880.94 at 6.25% for 15 years.
Put those two payments into the break-even tool with $5,200 of costs.
Monthly change: 2068.81 − 2880.94 = −$812.13. The published result is No break-even, because the new payment is not lower.
Calculator result
Mortgage refinance break-even
- Current monthly payment
- $2,068.81
- New monthly payment
- $2,880.94
- Refinancing costs
- $5,200.00
No break-even
new payment is not lower
- Monthly change
- -$812.13
A shorter term can still be the goal. The CFPB handout lists that as a separate reason: pay off faster, pay less total interest, accept a higher monthly bill. That is not a payment break-even. The mortgage payment post shows the interest drop on that 15-year path: $182,569.35 versus $408,771.53.
Example 8: a $50 cut never pays in five years
- current: $2,200
- new: $2,150
- costs: $5,200
Monthly saving: $50.00
Months: 5200 ÷ 50 = 104 months
Five-year saving after costs: 50 × 60 − 5200 = −$2,200.00
Eight years and eight months is the recover date. At year five you are still $2,200 in the hole on this cash test.
Example 9: a smaller loan, same 24-month shape
- current: $980
- new: $860
- costs: $2,800
Monthly saving: $120.00
Months: 2800 ÷ 120 = 23.333…, rounded up to 24 months
Five-year saving after costs: $4,400.00
The months match the default case. The dollars on both sides are smaller.
Example 10: derive the two payments, then test the cut
The mortgage tool on the published $420,000 house, $84,000 down, 30 years:
- 6.25%: $2,068.81 a month, $408,771.53 of interest
- 5.25%: $1,855.40 a month, $331,945.60 of interest
Payment cut: 2068.81 − 1855.40 = $213.41
Interest cut if both loans run 30 years: 408771.53 − 331945.60 = $76,825.93
That interest cut is not the break-even. The break-even tool needs the cash you actually pay to refinance. On $5,200 of costs and a $213.41 saving, 5200 ÷ 213.41 = 24.37…, which rounds up to 25 months.
Reset the term when you refinance and the interest comparison changes. A new 30-year clock on a lower balance can cost more interest than the remaining years on the old loan, even when the payment fell. The CFPB handout draws that picture: lower payments for more years can mean a higher total.
The ten break-evens next to each other
| Example | Current | New | Costs | Saving | Months | 5-year after costs |
|---|---|---|---|---|---|---|
| 1. Defaults | $2,200 | $1,980 | $5,200 | $220.00 | 24 | $8,000.00 |
| 2. Small cut | $2,200 | $2,100 | $5,200 | $100.00 | 52 | $800.00 |
| 3. Large cut | $2,200 | $1,800 | $5,200 | $400.00 | 13 | $18,800.00 |
| 4. High costs | $2,200 | $1,980 | $8,000 | $220.00 | 37 | $5,200.00 |
| 5. Low costs | $2,200 | $1,980 | $3,000 | $220.00 | 14 | $10,200.00 |
| 6. Move risk | $2,400 | $2,100 | $6,500 | $300.00 | 22 | $11,500.00 |
| 7. 15-year payment | $2,068.81 | $2,880.94 | $5,200 | none | none | n/a |
| 8. $50 cut | $2,200 | $2,150 | $5,200 | $50.00 | 104 | −$2,200.00 |
| 9. Smaller loan | $980 | $860 | $2,800 | $120.00 | 24 | $4,400.00 |
| 10. 6.25% to 5.25% | $2,068.81 | $1,855.40 | $5,200 | $213.41 | 25 | $7,604.60 |
Five-year after costs for example 10: 213.41 × 60 − 5200 = $7,604.60.
Open the refinance break-even calculator with the two principal-and-interest lines from the Loan Estimate and the cash to close that is not a rate credit. If extra principal is the other lever, the mortgage extra payment tool and the overpayment vs investing post are the comparison.