Refinance Break Even Calculator with Closing Costs
Calculate your refinance break-even point including closing costs. See if refinancing saves money and when you start realizing actual savings. Free calculator with instant results.
Quick Answer
Refinance break-even occurs when monthly savings equal closing costs. If you plan to stay past this point, refinancing typically saves money. Most break-even points are 2-4 years.
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Calculate With Full ToolWhat is Refinance Break Even with Closing Costs?
Refinance break-even calculates when your monthly payment savings equal the total closing costs. Before this point, you're still recovering your refinance investment. After this point, every payment represents actual savings compared to your original loan.
How Break Even Works
Closing costs typically range from 2-6% of your loan amount. If you save $200 monthly and pay $6,000 in closing costs, your break-even point is 30 months ($6,000 ÷ $200). After 30 months, you save $200 each month for the remaining loan term.
Why Break Even Analysis Matters
Understanding break-even helps you make smart refinancing decisions. If you plan to move before the break-even point, refinancing costs more than it saves. This analysis prevents expensive mistakes and ensures refinancing actually improves your financial position.
Refinance Break Even Formula
Break Even Months = Total Closing Costs ÷ Monthly Payment Savings
Monthly Savings: Current Payment - New Payment
Total Closing Costs: Lender fees + appraisal + title + attorney + prepaid items
Break Even Point: Months to recover closing costs
Total Savings: Monthly Savings × (Remaining Months - Break Even Months)
Net Savings: Total Savings - Closing Costs
Step-by-Step Example
Example: $300,000 Refinance at Lower Rate
Step 1: Current Payment: $1,896/month (6.5% rate)
Step 2: New Payment: $1,520/month (4.5% rate)
Step 3: Monthly Savings: $1,896 - $1,520 = $376
Step 4: Closing Costs: $8,000 (2.7% of loan)
Step 5: Break Even: $8,000 ÷ $376 = 21.3 months
Step 6: Remaining Term: 27 years (324 months)
Step 7: Total Savings: $376 × (324 - 21.3) = $114,000
Step 8: Net Savings: $114,000 - $8,000 = $106,000
This example shows breaking even in just 21 months and saving $106,000 over the loan life. The refinance pays for itself in under 2 years, then provides substantial savings.
Who Should Use This Calculator?
Current Homeowners
Evaluate if refinancing saves money
Rate Shoppers
Compare refinance offers objectively
Financial Advisors
Help clients make refinance decisions
Real Estate Investors
Optimize investment property financing
Frequently Asked Questions
What's a good break-even period?
Generally under 3 years is good. If you plan to stay longer than your break-even point, refinancing usually makes financial sense despite closing costs.
How much are typical closing costs?
Expect 2-6% of loan amount. On a $300,000 refinance, that's $6,000-$18,000. No-closing-cost refinances exist but often have higher rates.
Should I roll closing costs into the loan?
This increases your loan amount and monthly payment slightly, but preserves cash. Calculate both options - sometimes paying upfront gives better long-term results.
When is refinancing worth it?
When you can lower your rate by at least 0.5-1% and plan to stay past the break-even point. Also consider if you need cash out or want to change loan terms.
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