Mortgage Refinance Calculator — Break-Even & Savings

Break-even is the point at which the monthly savings from your lower payment have added up to cover the closing costs you paid to refinance. Formula: break-even months = total closing costs ÷ monthly P&I savings (rounded up). If you sell or refinance again before break-even, you lose money on the deal.

The traditional rule of thumb is a rate reduction of 0.75 to 1.0 percentage points, but it only holds if you stay in the home long enough to clear break-even. With closing costs of 2–5% of the loan amount and 2026 30-year rates around 6.5%, most rate-and-term refis need at least a 0.5–1.0 pp drop and 3–7 years of remaining tenure to be worthwhile.

Closing costs on a refi typically include: lender origination fees (0.5–1.5% of loan), discount points if buying down the rate, an appraisal ($400–$700), title insurance and title search, escrow / settlement fees, recording fees, and prepaid interest, taxes, and insurance. Per the CFPB Loan Estimate, total closing costs commonly run 2–5% of the new loan amount.

The calculator uses the standard amortization formula M = P × r(1+r)^n / ((1+r)^n − 1), where P is the new loan balance, r is the new monthly interest rate (annual ÷ 12), and n is the new term in months. Property tax and homeowner's insurance are not included — they are the same before and after the refi and would cancel out of the savings comparison.

Resetting to a 30-year term lowers the monthly payment more, which helps cash flow, but you may pay more total interest over time because you reset the amortization clock. A 15-year refi usually has a lower rate and slashes total interest but raises the monthly payment. Compare lifetime savings, not just monthly P&I — this calculator shows both.

A cash-out refi replaces your existing loan with a larger one and you take the difference in cash. It is not an apples-to-apples comparison with a rate-and-term refi because you are borrowing more money. Break-even on the rate change is still meaningful, but you should evaluate the cash-out portion separately as a new loan against whatever the cash is funding (renovation, debt consolidation, etc.).

You can usually roll closing costs into the new loan balance instead of paying out of pocket. The trade-off: you finance those costs at the new rate over the new term, so total cost is higher and break-even months extend slightly. Some "no-cost" refis pay closing costs by accepting a higher rate — the cost moves into the monthly payment instead of the loan balance.

Mortgage interest is tax-deductible for itemizers up to limits set by the IRS (currently $750K of acquisition debt for loans after Dec 15, 2017). A lower rate means lower interest paid and a smaller deduction — your effective savings are slightly less than the headline cash-flow number. Points paid on a refi are generally deducted over the life of the loan, not in the year paid. Consult a tax advisor for your specific situation.