Mortgage Refinance Calculator: Break-Even on Closing Costs
Refinancing trades thousands in closing costs for a lower monthly payment. See how many months it takes to recoup those costs — and the honest lifetime-interest catch when a lower rate comes with a fresh 30-year term. Math runs locally.
Two numbers that can disagree
Refinancing is usually sold on the monthly payment, but there are two separate questions. First, break-even: dropping a $300,000 balance from 7% to 5.5% saves about $335/month, so $6,000 of closing costs is recouped in roughly 18 months — stay in the home past that and the refi pays off. Second, lifetime interest: because that example also keeps the loan close to its remaining length, total interest falls by around $66,000 too.
The trap is the term reset. If you're 8 years into a 30-year loan and refinance into a fresh 30-year term, the monthly payment can drop nicely while total interest goes up — you've just re-stretched the loan back out. This tool shows both signals so a lower payment doesn't quietly cost you more over the life of the loan. To keep the interest win, refinance into a term no longer than the years you have left.
How the math works
- Current payment = standard amortization of your remaining balance at the current rate over the months left.
- New payment = amortization of the same balance at the new rate over the new term.
- Break-even = closing costs ÷ (current payment − new payment), in months. If the new payment is higher (shorter term), there's no cash-flow break-even.
- Lifetime savings = remaining interest on the current loan − (interest on the new loan + closing costs).
Source: CFPB Owning a Home (refinance break-even framing) and Freddie Mac PMMS for prevailing 30-year rates.
Math runs locally. Inputs never leave your browser. Source on github.
Where this doesn't apply
- You're doing a cash-out refi. Pulling equity raises the new balance above the current one, which this tool doesn't model. The payment and interest will both be higher than shown.
- You'll move before break-even. If you expect to sell or refinance again within the break-even window, the closing costs never pay for themselves — even a great rate loses money on the deal.
- You're comparing points vs rate. Paying discount points buys a lower rate for more upfront cost — its own break-even calculation that this tool folds into a single closing-cost number.
- An ARM or rate-lock fee is involved. This assumes a fixed rate held for the full term. Adjustable rates and lock-extension fees change the comparison.
What to actually do
- Pull your exact remaining balance, rate, and months left from your latest statement.
- Get a Loan Estimate from two or three lenders — closing costs vary a lot, and the form makes them comparable.
- Set the new term to no more than the years you have left if you want the lifetime-interest win, not just a lower payment.
- Check the break-even against how long you'll realistically stay. Under ~24 months is a strong refi; past your expected move date, skip it.
- If the goal is just paying less interest, compare against simply making extra principal payments on the current loan (the Loan Payoff tool).