Last Updated: October 2025
Use this Breakeven Calculator to determine how quickly your monthly savings from refinancing will offset your closing costs. Understanding your Breakeven Point is crucial for smart mortgage decisions.
Mortgage Refinance Breakeven Calculator
Mortgage Refinance Breakeven Formula
Breakeven Point (B) = Total Closing Costs (C) / Monthly Savings (S)
Variables Explained
- Current Monthly Payment: The total monthly principal and interest payment you are currently making on your original mortgage.
- New Estimated Monthly Payment: The predicted monthly payment (principal and interest) under the new, refinanced loan terms.
- Total Refinance Closing Costs: The sum of all fees required to close the new loan, including appraisal, legal fees, origination fees, etc.
- Breakeven Point: The number of months it takes for your cumulative monthly savings to equal your total closing costs.
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What is Mortgage Refinance?
Mortgage refinancing involves replacing your existing home loan with a new one. Homeowners typically refinance to secure a lower interest rate, which reduces their monthly payment, or to change the loan term (e.g., moving from a 30-year to a 15-year mortgage). It can also be used to switch from an adjustable-rate to a fixed-rate mortgage.
However, refinancing always incurs closing costs, which can range from 2% to 5% of the new loan principal. The primary goal of a Breakeven Calculator is to help you decide if the long-term savings justify the upfront expense. If you plan to sell your home before reaching the Breakeven Point, refinancing may not be financially beneficial.
How to Calculate Mortgage Refinance Breakeven (Example)
- Determine Monthly Savings: Subtract the New Payment ($2,000) from the Current Payment ($2,500). ($2,500 – $2,000 = \text{\$500 Monthly Savings}$)
- Identify Closing Costs: Gather all associated refinance fees, such as $8,000.
- Calculate Breakeven Point: Divide the Closing Costs by the Monthly Savings. ($8,000 / \$500 = \text{16 Months}$)
- Analyze the Result: In this example, it would take 16 months for the savings realized from the lower monthly payment to fully recoup the $8,000 in closing costs. If you plan to stay in the home longer than 16 months, the refinance is likely worthwhile.
Frequently Asked Questions (FAQ)
Is the Breakeven Point the only factor I should consider?
No. While the Breakeven Point is crucial, you should also consider the overall interest saved over the life of the loan, any change in the loan term, and whether the new mortgage includes PMI (Private Mortgage Insurance).
What if my monthly savings is zero or negative?
If your new monthly payment is equal to or higher than your current payment, the calculator will indicate an error, as you can never recover the closing costs through savings. In this scenario, refinancing is not for monthly savings, but potentially to shorten the loan term or access cash (cash-out refinance).
Are closing costs always a fixed number?
No. Closing costs are typically variable and can include fees like appraisal, title insurance, attorney fees, and lender origination fees. You must request a formal Loan Estimate from a lender for an accurate cost figure.
How long does the refinancing process typically take?
The process usually takes between 30 to 45 days from application to closing, but it can be longer depending on lender volume and the complexity of your financial situation.