⚑ An estimate, not advice
This tool provides estimates for educational purposes only and is not financial, tax or legal advice. Consult a licensed professional before making decisions.
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Break-even point
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$0New monthly payment
$0Monthly savings
$0Current monthly payment
↻ Mind the term
Extending the term can lower the payment but often raises the total interest you pay over the life of the loan.
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Compare today's mortgage & refinance rates
Rates change daily, and so do lender fees. Comparing several lenders before you lock can cut your closing costs and shorten your break-even. Prefer an interest-free route? Read our halal mortgage guide below.
Halal home-finance options →How the refinance break-even calculator works
Both payments use the standard amortization formula for principal and interest:
M = P · [ r(1+r)n ] / [ (1+r)n − 1 ]
where P is your current loan balance, r is the monthly rate (annual rate ÷ 12), and n is the number of months (years × 12). We run it twice — once at your current rate and remaining term, once at the new rate and new term — on the same balance.
Your monthly savings is the current payment minus the new payment. The break-even point is then how long those savings take to repay your closing costs:
Break-even months = ⌈ closing costs ÷ monthly savings ⌉
If you expect to keep the home and the loan past that month, refinancing usually pays off. If the new payment is not lower — for example a lower rate offset by a much shorter term — there are no monthly savings and the break-even cannot be reached on payment alone.
Frequently asked questions
What is the refinance break-even point?
It is the number of months it takes for your monthly savings to repay the refinance's closing costs — closing costs ÷ monthly savings, rounded up. Keep the loan past that month and the refinance tends to pay off.
How are the monthly savings calculated?
We compute the principal-and-interest payment on your balance at the current rate and remaining term, then at the new rate and new term. Monthly savings is the current payment minus the new payment.
Why does a longer term lower my payment but cost more overall?
Spreading the same balance over more years makes each payment smaller, but you pay interest for longer — so total interest over the life of the loan is usually higher, even at a lower rate.
Should I always refinance when rates drop?
No. Closing costs, how long you'll stay, whether you reset the term, and cash-out needs all matter. If you'll move or pay off before the break-even month, refinancing can cost you money.
Related tools
Sources & further reading
Standard amortization formula; U.S. Consumer Financial Protection Bureau (consumerfinance.gov) for refinance and closing-cost guidance. Read our full disclaimer →