US HOMEOWNERS · REFINANCE DECISION
Mortgage Refinance Break-Even Calculator
A lower rate is not automatically a better refinancing deal. Calculate the monthly payment difference alongside the closing costs and expected time in the home.
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Calculation results
Payment-only break-even ignores principal balance differences, taxes, time value of money and term extensions.
Estimate only. A bank, employer, tax office or lender may apply additional conditions. See the scope and source below.
When and how to use this calculator
With a $250,000 balance, a hypothetical rate drop from 7% to 5.5%, and $5,000 cash closing costs, the simple payback time is $5,000 divided by the difference between the two calculated monthly principal-and-interest payments.
- Use the CURRENT remaining loan principal and number of months left—not the original price or original 30-year term.
- Use the actual quoted NEW rate and term, including a longer term only when that is the offer you are considering.
- Enter cash closing expenses (lender fees, title or appraisal fees), compare the payment-only payback period with when you may move or refinance again, and also compare total interest and principal balances.
Understand your result
Assumes fixed rates, equal monthly payments and the same principal at refinance. Payment-only break-even ignores differences in outstanding principal after the holding period, financed costs, escrow, prepaid interest, taxes, mortgage insurance and discounting.
Questions people ask
Why can a longer refinancing term look cheaper per month?
Spreading principal over more months lowers monthly principal payments but can increase lifetime interest. This break-even is a payment illustration, not the full net present value of refinancing.
Is a zero-closing-cost mortgage truly free?
Not necessarily. Some costs are financed or exchanged for a higher interest rate; include the real cost of your written loan offer.
Does the break-even guarantee refinancing is worthwhile?
No. Loan balances may diverge, rates can change, fees vary and the time value of money matters.
Reference and calculation scope
Source material is provided for independent checking. Our calculator is not a government or bank service.