Refinance Calculator

A refinance calculator compares the payment you have now with the payment on a new loan, then divides the closing costs by the monthly savings to find your break-even point. Refinancing a $280,000 balance from 7.25% to a 30-year loan at an example rate of 6% cuts the payment by $317.78, so $6,000 in costs is earned back in 19 months.

How to use the refinance calculator

1. Enter what you owe today, your current rate and how many years and months are left. The calculator works out your current principal and interest payment so you can check it against your statement.
2. Pick the new loan term and type the rate from your own quote. The 6% shown is only an example.
3. Add the closing costs and any points from your Loan Estimate, and choose whether you pay them at closing or roll them into the new loan.
4. If you want cash out, enter the extra amount you plan to borrow.
5. Type how many years you expect to keep the loan. The result shows whether you come out ahead by then, and the term table compares 30, 20, 15 and 10 years and a loan that keeps your current payoff date.

Refinance break-even formula

The quick method, the one in the Federal Reserve’s refinancing worksheet, is

Break-even months = total refinancing costs ÷ monthly savings

• Total costs are the lender and third-party fees plus points, whether you pay them at closing or add them to the loan.
• Monthly savings is your current principal and interest payment minus the new one.

Round the answer up, because the costs are not fully earned back until the end of that month. Both payments come from the standard loan formula M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the amount borrowed, r is the yearly rate ÷ 12 and n is the number of monthly payments.

The quick method ignores one thing: how fast each loan pays down principal. The calculator also shows a break-even including your balance. Each month it adds the payments you have saved, subtracts what you paid at closing and adds the difference in the balance you would still owe. When that total turns positive, refinancing has paid for itself even if you sold the house that month.

Worked example: lowering the rate

You owe $280,000 at 7.25% with 26 years (312 payments) left, and you are offered a 30-year loan at an example rate of 6% with $6,000 in closing costs.

1. Current payment: r = 0.0725 ÷ 12 ≈ 0.0060417, n = 312, so M ≈ $1,996.52.
2. New payment: r = 0.06 ÷ 12 = 0.005, n = 360, (1.005)³⁶⁰ ≈ 6.0226, so M ≈ $1,678.74.
3. Monthly savings: $1,996.52 − $1,678.74 = $317.78.
4. Break-even: $6,000 ÷ $317.78 ≈ 18.88, so 19 months.

Including the balance, break-even comes at month 21, a little later, because the new 30-year loan pays down principal more slowly at first. Over the full loans you pay $342,915.13 in interest if you keep the current loan and $324,347.80 if you refinance. After the $6,000 in costs, the lifetime saving is $12,567.33. If you keep the new loan 7 years, you come out about $16,471.27 ahead.

Resetting the clock: when a new 30-year term costs more

The new loan in the example ends 4 years later than the old one. The CFPB’s guide Should I refinance? warns that lower payments for more years could mean a higher total cost. A loan that keeps your current payoff date (26 years at 6%) costs $1,774.30 a month: $222.22 less than now, and $63,336.90 saved over the loan. Its quick break-even is 28 months, yet including the balance it breaks even at month 21, the same as the 30-year loan.

A 15-year loan at the same rate raises the payment by $366.28, so the quick formula says it never breaks even. Including the balance, it pays for itself after 19 months and saves $191,611.29 over the loan. That is why the calculator shows both break-even figures.

Are points worth paying?

The CFPB explains that one point equals 1% of the loan amount and lowers your interest rate, and that points can make sense if you keep the loan a long time. Suppose one point ($2,800 on $280,000) buys an example rate of 5.75% instead of 6%. The payment falls from $1,678.74 to $1,634.00, a $44.74 difference. Paying for the point alone takes $2,800 ÷ $44.74 ≈ 62.6, so 63 months, more than 5 years. If you might move or refinance again sooner, the point probably does not pay for itself.

Break-even quick reference

Months to earn back the costs at different monthly savings (rounded up):

Rolling closing costs into the loan

If you roll the $6,000 into the example loan, you borrow $286,000, nothing is due at closing, and the payment is $1,714.71. You still save $281.81 a month, but you now pay interest on the costs for 30 years. Break-even moves to 22 months, and the lifetime saving drops from $12,567.33 to $5,614.98. Rolling costs in helps when cash is short; it does not make the costs go away.

Cash-out refinancing

In a cash-out refinance you borrow more than you owe and receive the difference. A CFPB research blog notes that cash-out borrowers’ payments and loan terms are likely to rise, and that borrowers who fall behind could lose their home to foreclosure. Taking $40,000 out on the example at 6.5% makes the new loan $320,000 and the payment $2,022.62, $26.10 more than now. There is no break-even here, because you are borrowing new money; the useful question is what that $40,000 costs compared with other ways to borrow it.

Common refinance mistakes

• Comparing only monthly payments. A longer term can lower the payment while raising total interest.
• Forgetting points and penalties. Count points and any prepayment penalty in total costs. The CFPB says to check your loan papers, because a penalty must be paid when you refinance.
• Using the full payment. Taxes and insurance stay about the same either way, so compare principal and interest.
• Ignoring how long you will stay. If you move before break-even, refinancing loses money.
• Treating an example rate as a quote. Your Loan Estimate shows your real rate, payment and closing costs, so compare offers using it.

This calculator gives estimates for planning and learning, not financial advice. It assumes fixed rates and no extra payments.

Sources

• Consumer Financial Protection Bureau: Should I refinance? (September 2020, U.S. Government Publishing Office copy)
• Consumer Financial Protection Bureau: How should I use lender credits and points?
• Consumer Financial Protection Bureau: A look at cash-out refinance mortgages and their borrowers
• Consumer Financial Protection Bureau: What is a Loan Estimate?
• Federal Reserve Board: A Consumer’s Guide to Mortgage Refinancings (archived guide with the break-even worksheet)

Sources checked November 2026.

Refinance break-even practice quiz: 10 questions

Test yourself with 10 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.

Frequently asked questions

How do you calculate the break-even point on a refinance?

Add up the closing costs and points, then divide by how much the new loan lowers your monthly principal and interest payment. With $6,000 in costs and $317.78 a month in savings, 6,000 ÷ 317.78 ≈ 18.9, so you break even after 19 months.

Is it worth refinancing for a rate 1% lower?

It depends on your costs and how long you stay. Moving the example $280,000 from 7.25% to 6.25% while keeping 26 years saves $178.73 a month, so $6,000 in costs takes 34 months to earn back, and you save $49,764.77 over the loan.

Does refinancing restart my mortgage?

Yes, a refinance is a new loan with a new term. Choosing 30 years when you have 26 left adds 4 years of payments. You can ask for a term that matches your remaining years, or choose a shorter one, and the calculator compares those options.

Can I roll closing costs into my refinance?

Many lenders let you add the costs to the new loan. You pay nothing at closing, but the balance and payment are higher and you pay interest on the costs. In the example, rolling in $6,000 cuts the lifetime saving from $12,567.33 to $5,614.98.

How much does it cost to refinance?

The CFPB says refinancing can involve many of the same costs as your original mortgage, and points add to them. Costs vary by lender and location, so use the total from each Loan Estimate you receive and include any prepayment penalty on your current loan.

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