Mortgage calculator

Refinance Break-Even Calculator

Compare keeping your current loan with refinancing it — the monthly difference, the month the savings repay the closing costs, the total interest on each path, and the total cost over the years you choose.

Assumptions this tool makes

• Both rates are hypothetical example rates you enter; neither is an offer. The new loan amount equals the current balance — cash taken out and costs rolled into the loan are not modeled here.
• Break-even months = closing costs ÷ monthly payment saving, and exists only when the new payment is lower. A shorter new term can raise the payment and still cut total interest sharply; the result shows both facts instead of calling that a failed refinance.
• Total interest on each path assumes you keep that loan to the end of its term and never pay extra. Total cost over your chosen horizon counts the payments made in that window plus the balance still owed at the end of it, plus closing costs on the new loan — the fair comparison when the two terms differ.
• Taxes, insurance, and HOA dues are left out because they continue on either path. Mortgage insurance changes, prepayment penalties, and the value of investing the monthly difference are not modeled.

The formula

Each payment uses the standard amortization formula: payment = balance × r × (1 + r)^n ÷ ((1 + r)^n − 1), with r = rate ÷ 100 ÷ 12 and n = years × 12 (at a 0% rate, payment = balance ÷ n). Total interest = payment × n − balance. Break-even months = closing costs ÷ (current payment − new payment) when the new payment is lower. Balance after k months = balance × (1 + r)^k − payment × ((1 + r)^k − 1) ÷ r, and total cost over a horizon = payments made in the horizon + the balance still owed at its end.

A worked example

Balance $620,000, current rate 7.4% with 27 years left, new rate 6.2% on a new 30-year term, closing costs $6,500, horizon 5 years. Both rates are hypothetical example rates.

• Current payment: $4,427.41. New payment: $3,797.31. Monthly saving: $4,427.41 − $3,797.31 = $630.11.
• Break-even: $6,500 ÷ $630.11 = 10.32 months — the savings repay the costs during month 11.
• Total interest, keeping the current loan: $814,481.79. Total interest, new loan: $747,030.76. Interest saved: $814,481.79 − $747,030.76 = $67,451.04 — saved even though the new term restarts the 30-year clock, because the rate drop is large.
• Total cost over 5 years: keeping the loan $841,946.24 (payments plus the balance still owed); refinancing $812,683.15 (costs plus payments plus the balance still owed). Net benefit over the horizon: $29,263.10.

How to read your result

• Compare the break-even month with how long you realistically expect to keep the loan. A break-even at month 11 is a strong result for a five-year stay and a wasted $6,500 on a nine-month stay.
• When the new term is longer than the years you have left, read the total interest line before celebrating the lower payment — restarting the clock can hand the rate saving back.
• When the new term is shorter and the payment rises, judge by total interest saved and the horizon cost, not by the break-even line, which does not exist when the payment goes up.
• If the horizon cost favors refinancing but the lifetime interest does not, your answer depends on when you sell or refinance again — run the horizon at that year and decide on that row.

Related guides

• Refinancing in California
• Cash-out refinancing in California
• Cash-out refinance calculator