Refinance Break-Even Calculator
Find out how long until your new lower payment recoups closing costs — and whether refinancing is worth it.
How the break-even calculation works
Refinancing replaces your current loan with a new one at a lower rate, but closing costs (typically 2–5% of the loan) must be paid upfront. The break-even point is when your accumulated monthly savings equal those closing costs. If you plan to stay in the home longer than the break-even period, refinancing saves money. If you'll move sooner, you may not recoup the costs.
What counts as closing costs when refinancing?
Refinance closing costs typically include: loan origination fee (0.5–1%), appraisal ($300–$600), title search and insurance ($700–$900), recording fees, and prepaid interest. Total usually runs 2–5% of the loan amount. Some lenders offer "no-closing-cost" refinances that roll costs into the rate — use the higher rate in the "New Rate" field to model that scenario.
Is the 1% rule for refinancing accurate?
The old "only refinance if rates drop 1%" rule is outdated. What matters is the break-even period relative to how long you'll stay. A 0.5% rate drop on a large balance with low closing costs can break even in under a year. A 1.5% drop with high costs on a small balance might take five years. Use this calculator rather than rules of thumb.
Should I refinance to a 15-year or 30-year loan?
A 15-year loan saves dramatically on interest but raises your monthly payment. A 30-year loan lowers your payment but resets the clock — meaning you'll pay interest for longer. Use our Amortization Calculator to compare total interest under both term lengths, then weigh that against your monthly cash flow needs.
What if I've already paid off a lot of my loan?
Be careful. If you're 20 years into a 30-year loan and refinance to a new 30-year loan, you'll pay interest for 50 total years instead of 30. Even with a lower rate, this can cost more in total interest. The break-even calculation above accounts for this — check the "Net Interest Saved" number, which reflects total lifetime interest difference minus closing costs.