Break Even Mortgage Calculator
A lower rate means nothing until the monthly savings have paid back the closing costs. This calculator rebuilds both loan payments from your real balance and terms, divides your closing costs by the monthly saving to find your break-even month, then checks that month against how long you plan to stay. A second “true break-even” view adjusts for the lost tax deduction and the opportunity cost of the closing cash, both editable assumptions.
The 24% tax rate and 5% opportunity rate are editable assumptions, not facts about your situation. Leaving the new-term field blank sets it equal to your remaining term. Results stay hidden until you click Calculate.
Quick Answer
A $350,000 balance at 7.5% with 27 years left, refinanced to 6.5% over a new 30-year term with $5,000 in closing costs, breaks even in 16.1 months: the payment drops from $2,522.57 to $2,212.24, saving $310.33 a month, and $5,000 ÷ $310.33 = 16.1. The honest "true break-even", after the lost tax deduction and the opportunity cost of the closing cash, lands at 20.8 months. With a 10-year stay, the refinance nets $32,239.64 on payments.
Key takeaways
- Break-even months = total closing costs ÷ monthly saving. It is the month your cumulative savings finally pass what you paid to close.
- A break-even is only a decision when compared to your planned stay: 16.1 months against a 10-year horizon is a win; the same 16.1 months against a 1-year horizon is a loss.
- The true break-even (tax drag + opportunity cost, both editable assumptions) runs a few months longer than the naive one, 20.8 months here.
- A new 30-year term on a loan with 27 years left lowers the payment partly by adding three years of payments. Check total interest, not just the monthly line.
- Quick Answer
- How to use the refinance break-even calculator
- The break-even formula, naive and true
- Worked example: the $350,000 refinance, checked against the tool
- The term trap: a new 30-year term vs matching your remaining term
- What this calculator covers, and why each part matters
- Break-even vs cost of refinancing: two different questions
- Frequently asked questions
- Add This Calculator to Your Website
- References
How to use the refinance break-even calculator
Type your current loan, the refinance offer, and your horizon, then read the verdict. The results stay hidden until you calculate.
- Enter your current loan: the balance you still owe ($350,000 pre-filled), your current rate (7.5%), and the years remaining (27). The tool rebuilds your current payment from these, which is why it uses the remaining balance and term rather than the original loan figures.
- Enter the refinance offer: the new rate (6.5%), the new term (30 years), and the total closing costs ($5,000). Include everything you pay to close: origination, appraisal, title, and any discount points. Leave the new-term field blank and the tool matches your remaining term instead of restarting the clock.
- Enter your planned stay and assumptions: how long you will keep the home (10 years), plus the editable 24% marginal tax rate and 5% opportunity rate used only for the true break-even. Those two figures are assumptions you can change, not facts the tool asserts about you.
- Click Calculate break-even: both payments, both break-evens, the net saving over your stay, total interest on each loan, and a plain-language verdict appear together.
- Copy or share the result with the buttons in the results box when you want to keep a record or send it to a lender.
Impossible inputs are rejected outright with the same messages the calculator shows: blank or invalid entries ("Please enter a valid loan balance.", "Please enter valid closing costs.", "Please enter how long you plan to stay."), negative closing costs ("Closing costs cannot be negative."), and a zero or negative term ("Please enter valid years remaining."). If the new payment is not lower, the tool says so directly instead of inventing a break-even.
The break-even formula, naive and true
The naive break-even is one division: total closing costs divided by the monthly saving. The true break-even starts from the same saving and subtracts two real costs the naive version ignores.
Monthly saving = Current P and I − New P and I
True monthly benefit = Monthly saving − (interest saved × tax rate) − (closing costs × opportunity rate ÷ 12)
True break-even months = Total closing costs ÷ True monthly benefit
Both payments come from the standard amortization formula, which the CFPB's refinance guidance assumes when it frames break-even as costs divided by monthly savings. With P the balance, r the monthly rate, and n the payment count, the monthly payment is M = P × r(1+r)n ÷ ((1+r)n − 1).
The true version exists because the naive saving overstates the deal twice. First, a lower payment means less mortgage interest paid, which means a smaller mortgage-interest deduction: part of the saving is clawed back at your marginal tax rate (the IRS treats mortgage interest as deductible under the rules in Publication 936). Second, the closing cash is gone the day you sign, and that cash had an earning life of its own. The 24% tax rate and 5% opportunity rate are the tool's starting assumptions; change them to match your bracket and your next-best use of the cash.
Worked example: the $350,000 refinance, checked against the tool
A $350,000 balance at 7.5% with 27 years left, refinanced to 6.5% over a new 30-year term with $5,000 closing costs. Every figure below is the tool's actual output for those pre-filled inputs.
2. New P and I: $2,212.24
3. Saving: $310.33 ÷ into $5,000 = 16.1 mo
4. True benefit $240.94 → 20.8 mo
The same tool, run on five more situations, produces the checks below. Every row is a real run of this calculator, so you can type any set in and get the same figures back.
| Situation | Monthly saving | Naive break-even | True break-even | Verdict |
|---|---|---|---|---|
| Worked example (stay 10 yr) | $310.33 | 16.1 mo | 20.8 mo | Clear win, net $32,239.64 |
| Same, but selling in 2 yr | $310.33 | 16.1 mo | 20.8 mo | Win, net $2,447.93 |
| New rate higher (8%) | −$45.61 | None | n/a | No payment break-even |
| New term matches 27 yr | $228.13 | 21.9 mo | 32.8 mo | Win, net $22,375.12 |
| Small drop to 7.25%, 27-yr term, $6,000 costs, 37% tax, 8% opp | $57.89 | 103.6 mo | Never | True benefit negative (−$3.53/mo), costs never covered |
The term trap: a new 30-year term vs matching your remaining term
Refinancing 27 years remaining into a new 30-year term is the single most common way a good-looking refinance quietly costs more. The payment drops partly because three extra years of payments were added at the tail.
New 30-year term
- New P and I: $2,212.24
- Monthly saving: $310.33
- Total interest, new loan: $446,405.71
- Catches: term runs 3 years longer; $53,006.37 more lifetime interest than the matching-term option
New term matched to 27 years
- New P and I: $2,294.44
- Monthly saving: $228.13
- Total interest, new loan: $393,399.34
- Wins: no clock reset; $53,006.37 less total interest; break-even 21.9 mo against a 10-year stay still wins by $22,375.12
The monthly payment is lower with the 30-year term, but the lifetime cost is $53,006.37 higher. Leave the new-term field blank and the calculator runs the matched-term comparison automatically. If your goal is the lowest payment because the budget is tight, the 30-year term is a legitimate choice, but you should know exactly what those three extra years cost, which is why the tool shows total interest on both loans side by side.
What this calculator covers, and why each part matters
This calculator answers the only question that matters in a refinance: whether the break-even lands before you leave, on your numbers, with the tax and opportunity costs included.
- The break-even month. Closing costs divided by monthly saving: on the worked example, a $350,000 balance at 7.5% with 27 years left, refinanced to 6.5% over a new 30-year term with $5,000 in closing costs, breaks even in 16.1 months — the payment drops from $2,522.57 to $2,212.24, saving $310.33 a month, and $5,000 ÷ $310.33 = 16.1.
- The true break-even, with editable assumptions. After the lost tax deduction and the opportunity cost of the closing cash, the honest figure lands at 20.8 months on the same example (true benefit $240.94 a month). Both assumptions are editable, because your tax rate and your alternative return are yours, not the tool's.
- The total-interest comparison that exposes the term reset. A new 30-year term on a loan with 27 years left lowers the payment partly by adding three years of payments — so the tool compares total interest, not just the monthly line. With a 10-year stay, the worked-example refinance nets $32,239.64 on payments.
- A verdict against your planned stay. A break-even is only a decision when compared to how long you stay: 16.1 months against a 10-year horizon is a win; the same 16.1 months against a 1-year horizon is a loss. The calculator asks for your stay for exactly that reason, and the verdict answers it.
- The cases where there is no break-even. When the new rate is higher, or the true benefit is negative, the tool says so plainly instead of printing a meaningless month count: on one real run, a small rate drop with $6,000 costs and a negative true benefit of −$3.53 a month never breaks even.
Break-even vs cost of refinancing: two different questions
The break-even decision is not the same question as what refinancing costs. This tool answers the decision: given the closing costs, how many months until the savings have repaid them, and does that land inside your stay? Itemizing the costs themselves, fee by fee, is a separate job.
If you have not priced the refinance yet, start with our cost to refinance mortgage calculator to build the closing-cost figure, then bring that number back here to test whether the savings repay it. For the broader refinance decision beyond the monthly math, the home loan refinance calculator covers the full picture, and the mortgage payment calculator rebuilds either payment on its own.
Frequently asked questions
The month when your cumulative monthly savings finally exceed the closing costs: break-even months = total closing costs ÷ monthly saving. Before that month you are still paying off the refinance; after it, every month is net saving. In the worked example, $5,000 ÷ $310.33 = 16.1 months.
It depends entirely on your planned stay, which is why the calculator asks for it. A 16-month break-even with a 10-year stay is a strong refinance. A 16-month break-even with a planned sale in 12 months is a loss. Bankrate's refinance guidance makes the same point: if you expect to sell before your break-even point, refinancing is not the right move.
Because the simple version ignores two real costs. The interest you stop paying would have been tax-deductible, so part of every saved dollar is clawed back at your marginal tax rate. And the closing cash is gone the day you sign, when it could have earned a return elsewhere. In the worked example these drag the benefit from $310.33 to $240.94 a month and push break-even from 16.1 to 20.8 months.
Matching the term gives pure interest saving with no clock reset, and it is the cleanest comparison. A new 30-year term lowers the payment further but restarts amortization: in the worked example it adds $53,006.37 of total interest versus matching the 27-year term. Leave the new-term field blank and the calculator runs the matched-term version automatically.
Include everything you pay to close: origination, appraisal, title, and any discount points. Points you pay to buy the rate down are part of the cost side of the break-even. Closing costs typically run 2% to 5% of the loan amount, per Bankrate and the CFPB.
It means that after subtracting the tax drag and the opportunity cost, your true monthly benefit is zero or negative, so the costs are never covered no matter how long you stay. In that case the naive break-even is misleading you: the refinance looks like it pays off in months while the honest math says it never does.
They are editable starting assumptions, not facts about your situation. The 24% is a common marginal bracket and the 5% is a rough next-best return on cash. Change both to match your bracket and your alternatives; the tool recomputes the true benefit and true break-even instantly.
Yes. It runs entirely in your browser, needs no account, and stores nothing. Copy the result with "Copy my results" or send it to another app with "Share results".
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References
- Consumer Financial Protection Bureau. What does it mean to refinance your mortgage? (Ask CFPB: how refinancing replaces your current loan). Accessed October 24, 2026.
- Consumer Financial Protection Bureau. What are closing costs? (Ask CFPB: fees paid to close a mortgage, typically the break-even hurdle). Accessed October 24, 2026.
- Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction (deductibility rules behind the true break-even tax adjustment). Accessed October 24, 2026.
- Freddie Mac. Refinancing your mortgage (My Home by Freddie Mac: when refinancing makes sense, costs to weigh, and the steps involved). Accessed October 24, 2026.
- Bankrate. How Much Does It Cost To Refinance a Mortgage? (break-even = closing costs ÷ monthly savings; worked 30-month and 74-month examples). Accessed October 24, 2026.
- Bankrate. Refinancing A Mortgage: What It Means, How It Works (break-even table for a $400,000 loan at 7% refinanced to lower rates). Accessed October 24, 2026.
- Bankrate. How Often Can You Refinance Your Home? (if you expect to sell before your break-even point, refinancing is not the right move). Accessed October 24, 2026.
- Bankrate. 30-Year Refinance Rates (aim to break even within two to three years; closing-cost math on a $300,000 balance). Accessed October 24, 2026.
- NerdWallet. How to Calculate the Break-Even Point on a Mortgage Refinance (total loan costs ÷ monthly savings; term-extension and moving-soon warnings). Accessed October 24, 2026.