Refinance Break-Even Calculator
Find out how many months it will take for your monthly savings from refinancing to cover the upfront closing costs.
Formulas Used
Monthly Payment:
M = P × [r(1+r)n] / [(1+r)n − 1]
where P = loan balance, r = monthly interest rate (annual rate / 12), n = number of months.
Monthly Savings:
Savings = Current Monthly Payment − New Monthly Payment
Break-Even Point (months):
Break-Even = Closing Costs ÷ Monthly Savings
Net Lifetime Interest Saved:
Net Savings = (Total Interest on Current Loan) − (Total Interest on New Loan) − Closing Costs
Assumptions & References
- Calculations assume a fixed-rate mortgage with equal monthly payments (fully amortizing).
- The loan balance used for the new loan equals the current outstanding balance (no cash-out refinance).
- Closing costs are paid upfront and not rolled into the new loan.
- Tax deductibility of mortgage interest is not considered.
- No prepayment penalties are assumed on the existing loan.
- Formula reference: Consumer Financial Protection Bureau (CFPB) — Understanding Loan Options; Freddie Mac Mortgage Education.
- Break-even analysis methodology per Investopedia: Refinance Break-Even Point.