Refinance break-even calculator

Closing costs and what you borrow

Cash-flow break-even (the month your cumulative spend catches the do-nothing case) lands at Never. Adding the debt you still owe on each path — the equity-adjusted view — puts it at Never.

Payoff timing

PMI changes

PMI is removed once the balance falls to 80% of the $380,000 value. Rolling costs in or taking cash out raises the balance, so PMI can return or linger longer — that is already reflected in the figures above.

How to read this

If you expect to sell or refinance again before month —, the closing costs outweigh the saving. A lower payment with higher lifetime interest is still a reasonable trade when cash flow is the goal — just make the choice knowingly. To value the saving as an investment stream, use the NPV view or the future value calculator.

Break-even by rate drop

Same balance of $320,000 and $6,500 of closing costs, refinanced into a 30-year term. Each row is a different new rate.

Don't reset the clock: same remaining term

Refinancing at 6.00% but keeping the 26-year remaining term instead of stretching back to 30 years:

Keeping the original payoff date almost always wins on lifetime interest. Stretching the term only wins when monthly cash flow is the actual goal. If the rate gap is small, compare against simply paying extra principal with the extra payments calculator or the early payoff calculator.

Common questions

How do you calculate the refinance break-even point?

Divide total closing costs by the monthly payment saving. The result is the number of months you must stay in the home before the refinance pays for itself.

Does a longer term make refinancing look better than it is?

Yes. Resetting a 25-year balance back to 30 years lowers the payment but can raise lifetime interest. This calculator shows both the monthly saving and the lifetime interest change.

What counts as closing costs?

Origination and lender fees, appraisal, title and escrow, recording, and any discount points. Rolled-in costs still count — they are financed at the new rate.

How much of a rate drop do I need to make refinancing worth it?

There is no fixed rule such as 1%. What matters is closing costs divided by the monthly saving versus how long you will keep the loan. On a $320,000 balance with $6,500 of costs, a 0.5% drop typically breaks even in roughly four to five years, while a 1.25% drop breaks even in about two.

Should I refinance into a shorter term instead?

Refinancing a 26-year remaining balance into a 15- or 20-year term usually raises the monthly payment, so there is no payment-based break-even. The gain shows up as a large drop in lifetime interest. Compare the lifetime interest row rather than the break-even month in that case.

Is making extra payments better than refinancing?

Often, yes, when the rate gap is small: extra principal has zero closing costs and cannot be undone by a longer term. Compare both with the extra payments calculator before committing to a refinance.