Refinance Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
The simple refinance break-even point compares upfront refinance costs with the monthly payment savings produced by the new loan.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Estimate the current payment.
- Estimate the proposed new payment.
- Subtract to find monthly savings.
- Divide closing costs by monthly savings.
Worked example
If closing costs are $4,500 and monthly savings are $180, the simple break-even point is 25 months.
How to interpret the result
Also compare loan term and total interest. A lower payment can come from stretching repayment over more years.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Comparing rate alone instead of actual payment.
- Ignoring a reset of the loan term.
- Leaving points and lender fees out of cost.
Frequently asked questions
Is a shorter break-even better?
Generally, but term and total interest still matter.
What if the new payment is higher?
There is no savings-based break-even; the refinance may serve another goal.
Should points count?
Yes, when paid to obtain the new rate.