Refinance Break-Even Calculator

How to calculate refinance break-even?

The break-even point is reached when the cumulative monthly savings from your lower interest rate equals the upfront closing costs.

Formula: Break-Even Months = Total Closing Costs / (Current Payment - New Payment)

Using the break-even calculator: an example

If your refinance costs $4,500 and reduces your monthly payment from $1,800 to $1,650, you save $150 per month.

Step-by-step calculation:

1. Identify total closing costs ($4,500).
2. Subtract the new payment from the old ($150 savings).
3. Divide costs by savings (4,500 / 150 = 30 months).
4. Compare 30 months to your planned stay in the home.

Frequently Asked Questions

What are typical refinance closing costs?

They usually range from 2% to 5% of the loan amount, including appraisal, origination, and title fees.

Is it worth refinancing if the break-even is 5 years?

Only if you plan to stay in the home for significantly longer than 60 months to realize the long-term interest savings.