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Refinance Break-Even Calculator

Created by Tibor Pál, PhD candidate
Reviewed by Dominik Czernia, PhD and Jack Bowater
Last updated: Jan 18, 2024

Use the refinance break-even calculator to estimate the date when your savings from refinancing your loan exceed its costs. Read on to see how mortgage refinance break-even works and how to calculate the break-even point for a mortgage refinance.

Moreover, you can learn what a break-even point is and a refinance break-even rule of thumb.

If you want to get familiar with the concept of refinancing, check our refinance calculator before you delve into the break-even point. Also, you can apply our mortgage calculator if you want to make a computation related to a mortgage loan.

How to calculate mortgage refinance break-even?

Most people who refinance their mortgage loans aim for a lower monthly payment by obtaining a lower interest rate on the new loan. If this is your goal, you must ensure you will keep your home (and the new loan) long enough to compensate for the costs arising from refinancing. The day when you reach this specific stage refers to the break-even point.

To do this, we must answer the question: how to calculate the break-even point on refinancing? It's simple. Do it by dividing the total loan costs (or closing costs) by the monthly savings (the difference between the monthly payment of the original and the new loan's).

Refinance break-even point = Closing costs / Monthly savings.

Let's consider a simple example to see how to calculate mortgage refinance break-even. The refinancing cost is $2,000, and you will save $100 a month. Divide $2,000 by $100. The answer is 20. That means it will take 20 months to compensate for the cost of refinancing, and this is your break-even point. In other words, after a 20-month break-even point, you will begin to save money due to your refinancing.

However, you need to keep in mind that even though your monthly payments are less, you may end up maying more in total interest if the loan term of your new loan is longer than the remaining term of your original loan at the time of refinancing.

How to use the mortgage refinance break even calculator?

If you're still wondering how to calculate break-even point on refinance quickly, here is a guide on how to use our tool for that purpose:

  1. Current loan

In the first section, you need to give the details of the current car loan you would like to refinance.

You have two ways to obtain the estimation: you can use the remaining loan term or the monthly payment.

  • Original mortgage amount - You can give the original loan amount or the outstanding balance of the remaining loan
  • Due date - When you make the first payment of your original loan;
  • Payment - The monthly installments;
  • Loan term - The remaining or the original loan term;
  • Interest rate - The annual interest rate; and
  • Compound frequency (advanced mode).
  1. Refinancing loan

In this section, you need to add the details of the new loan you plan to use for mortgage refinance:

  • New loan's due date - The date of the first payment of the new loan;
  • New loan's term;
  • Interest rate;
  • Upfront fee - Any upfront fees as a percentage of the new balance;
  • Cost of refinancing;
  • Cash in/out - Fill in this field if you are about to pay some cash out (positive sign) or cash in (negative sign); and
  • Compound frequency (advanced mode)
  1. Results

In this section, you can read the following results:

  • Cost of refinancing;
  • Monthly savings;
  • Time until break-even point;
  • Date of break-even point; and
  • Interest cost difference.

In addition, you can follow the progression of balances of the two loans in a chart and study the differences between the original and the refinancing loan (payment summary).


How to calculate break even point for mortgage refinance?

To calculate refinance break-even point, you should simply divide the total loan costs by the monthly savings. Let's say the total cost of refinance is $2,000, and you will save $100 a month. Divide $2,000 by $100, and you will get the answer, which is 20 months.

What is a break-even point of a refinance loan?

A break-even point is an event when your accumulated savings, resulting from refinancing your existing loan, exceed the cost of the new loan. In other words, the break-even point occurs when you begin to save money.

How long should it take to break even on a refinance?

A crucial aspect of the refinancing process is to estimate when you would break even on these costs and start saving some money on the transaction. In some cases, it can take two or three years to break even, but if the loan term is long enough, it is worth waiting.

What is a refinance break even rule of thumb?

The refinance break-even point equals the closing costs divided by the monthly savings. It means that if saving money is the main reason for refinancing, the new loan should be kept until the refinance break-even point. That's the general refinance break-even rule of thumb for refinancing success.


You should consider the refinance break-even calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.

For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.

Tibor Pál, PhD candidate
Current loan
Compute based on...
remaining loan term
Original mortgage amount
Due date
Loan term
Interest rate
Refinancing loan
New loan's due date
New loan's term
Interest rate
Upfront fee
Costs of refinancing
Cash in / out
The cost of refinancing your current loan is $1,065.29.
Your will save $96.10 monthly.
Your accumulated savings resulting from refinincing will exceed the costs of the new loan after 12 months (after 12 payments).
This means that the break-even point will occur on the 15.May.2025.
However, keep in mind that because your new loan has a more extended repayment period than the remaining term of your original loan, the interest charges of the new loan mean you will pay $1,085.91 more than you would have done with your original loan.
Chart of balances until break-even point
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