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Refinance calculator

Whether a new loan pays off, and in which month it breaks even.

Reviewed by Victor Yuki Matusita on . First published .

Your numbers stay on your device
$
%
%
years

New monthly payment

$1,498.88/mo

You would pay $308.14 less a month. Counting the $6,000 of closing costs against the interest you save, the new loan breaks even in month 24, after 2 years.

  • New loan $250,000 · 46%
  • Interest $289,593 · 54%

Months left and closing costs

months
$
Closing costs are
Current loan
Monthly payment
$1,807.02
Interest
$292,104
Total cost
$542,104
Paid off in
25 years
New loan
Monthly payment
$1,498.88
Interest
$289,593
Total cost
$545,593
Paid off in
30 years

B costs $308 less a month and $3,490 more in all, closing costs included.

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Schedule of the new loan

How to use this calculator

  1. Enter what you owe now, your current rate and how many months are left.
  2. Type the new rate and term you were quoted.
  3. Add the closing costs and say whether you pay them at closing or add them to the new loan.
  4. Read the new payment, the break-even month and the two loans side by side, then save the schedule.

How the break-even is worked out

The formula

Both payments use M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the balance (plus the closing costs if they are added to the loan), r is the yearly rate divided by 12 and n is the number of months.

Every month of both schedules, the calculator adds up the interest paid so far. The break-even month is the first one in which closing costs + interest paid on the new loan ≤ interest the current loan would have charged. Counting interest, not payments, keeps a longer term from looking like a saving when it only spreads the debt out.

Assumptions

  • Both loans have fixed rates and equal monthly payments; the current payment is worked out from the balance, the rate and the months left.
  • Interest is charged once a month at the yearly rate divided by 12, on the balance, rounded to the cent.
  • The break-even month is the first month in which the closing costs plus the interest paid on the new loan are no more than the interest the current loan would have charged by then. This holds whether the costs are paid at closing or added to the loan.
  • Closing costs divided by the monthly savings is shown too, as the common shortcut; it can mislead when the new term is longer.
  • No prepayment penalty, tax effect or change in escrow is included.

Worked example

This is the example the calculator opens with, worked out by the same engine you use above.

You enter
Balance you owe now$250,000.00
Current rate7.25%
New rate6%
New term30 years
Months left300 months
Closing costs$6,000.00
Closing costs arePaid at closing
You get
Current monthly payment$1,807.02
New monthly payment$1,498.88
Monthly savings$308.14
Break-even monthMonth 24
Closing costs divided by monthly savingsMonth 20
Interest saved$2,510.23
Total cost saved-$3,489.77

You would pay $308.14 less a month. Counting the $6,000 of closing costs against the interest you save, the new loan breaks even in month 24, after 2 years.

Sources

Read the guide: Refinancing: find your break-even month

Educational tool

This calculator is an educational tool, not financial advice and not a loan offer. A lender decides whether you qualify and at what rate and cost.

Questions about refinancing

What is the break-even month?

The month in which what you save in interest has paid back the closing costs. Before it, refinancing has cost you money; after it, it starts to save.

Why are there two break-even numbers?

The common shortcut divides the closing costs by the drop in the monthly payment. When the new loan is longer, part of that drop comes from spreading the debt over more years, so the shortcut can look better than the interest really is. The calculator shows both.

Is a no-closing-cost refinance free?

No. The CFPB explains that the costs are either built into a higher rate or added to the loan. Choose "Added to the loan" to see that case.

What if I plan to move before the break-even month?

Then the closing costs are likely not to pay off. The schedule of the new loan shows the balance at the end of each year, so you can see where you would stand when you sell.

Privacy

Your numbers stay on your device. The calculator runs in your browser, so nothing you type is sent anywhere, and the link you copy keeps the numbers after the #, a part of the address your browser never sends.