Deciding whether to refinance your mortgage involves more than just looking at a lower interest rate. You must determine the break-even point: the exact month where your monthly savings finally exceed the upfront costs of the new loan. Use our professional tool below to calculate your timeline and total potential savings.
Include application fees, appraisal, title insurance, and points.
Only include Principal and Interest (exclude taxes/insurance).
Estimated principal and interest for your new loan.
Monthly Savings
Savings After 5 Years
function calculateRefiBreakEven() {
var costs = parseFloat(document.getElementById('closing_costs').value);
var currentP = parseFloat(document.getElementById('current_payment').value);
var newP = parseFloat(document.getElementById('new_payment').value);
var resultsDiv = document.getElementById('refi_results');
var breakEvenText = document.getElementById('break_even_text');
var monthlySavingsVal = document.getElementById('monthly_savings_val');
var fiveYearVal = document.getElementById('five_year_savings_val');
if (isNaN(costs) || isNaN(currentP) || isNaN(newP) || costs <= 0 || currentP <= 0 || newP <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var savings = currentP – newP;
if (savings <= 0) {
resultsDiv.style.display = "block";
resultsDiv.style.backgroundColor = "#fdeaea";
break_even_text.innerHTML = "No Savings Found: Your new payment is higher than or equal to your current payment. Refinancing may not be financially beneficial unless you are changing loan terms significantly (e.g., switching from an ARM to a fixed rate).";
monthly_savings_val.innerHTML = "$0";
five_year_savings_val.innerHTML = "$0";
return;
}
var months = Math.ceil(costs / savings);
var years = (months / 12).toFixed(1);
var fiveYearNet = (savings * 60) – costs;
resultsDiv.style.display = "block";
resultsDiv.style.backgroundColor = "#eafaf1";
break_even_text.innerHTML = "Your break-even point is " + months + " months (approx. " + years + " years).";
monthly_savings_val.innerHTML = "$" + savings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
five_year_savings_val.innerHTML = "$" + fiveYearNet.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
How the Refinance Break-Even Point Works
The math behind a mortgage refinance is relatively straightforward: you are trading upfront capital (closing costs) for a reduced monthly liability. However, the true value of the transaction depends entirely on how long you plan to keep the loan.
Key Factors in the Calculation:
Closing Costs: These typically range from 2% to 5% of the loan amount. They include loan origination fees, appraisal fees, title searches, and credit report charges.
Monthly Reduction: This is the difference between your current Principal and Interest (P&I) payment and your proposed new P&I payment.
The Break-Even Month: Calculated by dividing your total costs by your monthly savings. If you sell your home before this date, you actually lose money on the refinance.
Realistic Refinance Example
Let's look at a common scenario to illustrate the impact of the break-even point:
Metric
Value
Total Closing Costs
$3,600
Current Payment
$1,650
New Payment
$1,500
Monthly Savings
$150
Break-Even Point
24 Months (2 Years)
When Should You Refinance?
Financial experts generally suggest that a refinance makes sense if you plan to stay in the home for significantly longer than your break-even period. For example, if your break-even point is 30 months and you plan to stay in the home for at least 10 years, the refinance will result in thousands of dollars in net gain.
Conversely, if you anticipate moving for a job or upgrading your home within the next 2 years, paying thousands in closing costs for a lower monthly payment might result in a net financial loss.
Pro Tip: Don't forget to consider "No-Closing-Cost" refinances. While these often carry a slightly higher interest rate, they move your break-even point to Month 0 because you aren't paying upfront fees. Use this calculator to compare a standard refi against a no-cost option to see which maximizes your long-term wealth.