How this calculator works
This calculator answers one specific, practical question: how long does it take for a refinance to pay for itself? Enter your current and new monthly payments directly, or derive them from your loan balance, rates and terms, add the closing costs, and it reports the monthly savings, the breakeven point in months, and the net savings by the time you expect to move or refinance again.
It intentionally does not compare lifetime interest across different loan terms — the full refinance calculator on this site does that. This tool stays narrowly focused on the breakeven math, since that is usually the deciding question when a lower rate is on the table: will you keep the loan long enough for the savings to outweigh the upfront cost?
The formula
Monthly savings = current payment − new paymentBreakeven months = closing costs ÷ monthly savingsNet savings by horizon = monthly savings × months in horizon − closing costsWhen monthly savings are zero or negative, breakeven is undefined — refinancing would cost money every month with no payback period, and this calculator states that directly instead of showing a misleading number. Cash-out amounts, if used, are added to the new loan's principal before its payment is calculated.
Worked example: $2,000 to $1,800 payment, $3,000 closing costs, 5-year horizon
- Monthly savings = 2,000 − 1,800 = $200.
- Breakeven = 3,000 ÷ 200 = 15 months exactly.
- Over a 5-year (60-month) horizon: net savings = 200 × 60 − 3,000 = $9,000.
- Because 15 months is well within the 60-month horizon, the refinance pays off with room to spare.
Frequently asked questions
How is this different from the full refinance calculator on this site?
The refinance calculator compares lifetime interest across the current and new loan terms, which can reveal that a lower payment sometimes comes with higher total interest if the term is stretched out. This breakeven calculator skips that comparison and focuses purely on how many months it takes the monthly savings to repay the closing costs — use both together for the full picture.
What does the breakeven calculation show when my new payment isn't lower?
Then there is no monthly savings to recover the closing costs with, so a breakeven point does not exist. This calculator states that directly rather than dividing by a zero or negative number.
How does the breakeven month change my answer if I might move soon?
Generally that reduces or eliminates the benefit, since you would pay the closing costs without keeping the loan long enough to recoup them through monthly savings. Compare your expected time in the loan (the horizon field) against the breakeven months shown here.
Why does cash-out only affect the derive mode?
In derive mode, the cash-out amount is added to your current balance to compute the new loan's payment, since a cash-out refinance borrows more than you currently owe. In direct-entry mode, enter the new payment exactly as quoted, which should already reflect any cash-out you've included.
Does a shorter breakeven always mean a better refinance?
It means the upfront cost pays back faster, which is valuable if you might move or refinance again soon. It does not by itself account for total interest paid over the life of the loan — check the refinance calculator's lifetime interest comparison if the new loan's term is different from your current one.