Refinance Breakeven Calculator: When Will You Save Money?

Refinancing your mortgage can feel like free money. You lower your interest rate, and suddenly your monthly payment drops by $200.

But there is a catch: Refinancing costs money.

Between appraisal fees, origination fees, and closing costs, you might pay thousands of dollars just to get that new loan. The "Breakeven Point" is the exact moment when your monthly savings finally outweigh those upfront costs.

If you sell your home before this date, you lose money. If you stay after this date, you save money.

Use this simple calculator guide to find your magic number.

The "Calculator": How to Find Your Number

Since every loan is different, grab a calculator (or your phone) and follow these three simple steps.

The Formula

Total Closing Costs \ Monthly Savings = Months to Break Even

Step 1: Find Your "Total Closing Costs"

This is the total amount of fees you pay to get the new loan.

Where to find it: Look at the Loan Estimate document your new lender gave you. Look for "Section D: Total Loan Costs."
Typical Cost: Usually 2% to 6% of your loan amount.
Example: On a $300,000 loan, closing costs might be roughly $9,000.

Step 2: Find Your "Monthly Savings"

This is the difference between your old check and your new one.

The Math: [Current Monthly Principal & Interest] minus [New Monthly Principal & Interest].
Example:
- Current Payment: $2,100
- New Refinanced Payment: $1,900
- Monthly Savings = $200

Step 3: Divide to Find the Months

Now, divide Step 1 by Step 2.

$9,000 (Costs) ÷ $200 (Savings) = 45 Months

The Result: It will take you 45 months (or 3.75 years) to break even.

The Verdict: Should You Do It?

Once you have your number (e.g., 45 months), ask yourself one question: "Am I absolutely certain I will live in this house for longer than [X] months?"

If YES: Refinancing is a smart financial move. Every month after month 45 is pure profit.
If NO: Do not refinance. If you sell the house in year 2, you will have spent $9,000 to save $4,800, meaning you effectively lost $4,200 by refinancing.

A Quick Cheat Sheet

Breakeven < 2 Years: This is a "slam dunk." Do it immediately.
Breakeven 2 - 5 Years: This is normal. Proceed if you plan to stay long-term.
Breakeven > 5 Years: Be careful. Life happens (new jobs, kids, moves), and 5+ years is a long time to wait for a return on investment.

Try Our Breakeven Calculator