Refinance Break-Even Calculator

How the Refinance Break-Even Math Works

“Break-even” asks a simple question: how many months of lower payments does it take to earn back what you’ll spend to refinance? The core ingredients are (1) your current loan’s monthly principal-and-interest (P&I) payment, (2) the new loan’s P&I payment, and (3) all costs tied to refinancing—closing costs, discount points, and any prepayment penalty on your old loan.

This calculator computes your old payment using your remaining balance, interest rate, and time left. For the new payment, it uses the new rate and term. If you roll closing costs and points into the new loan, your principal is higher, so the new payment increases slightly; paying costs upfront leaves the new loan smaller, typically shortening the break-even.

The break-even in months is total refinance costs ÷ monthly savings. If your monthly savings are £0 or negative, there’s no break-even. A lower rate with a much longer term can still reduce the payment but might increase total interest over the years you’ll actually keep the loan. That’s why this tool also estimates interest paid over your chosen “hold period” (for example, 5–10 years) for both the old and new loans, so you can see the bigger picture beyond the monthly bill.

Keep in mind that taxes and insurance are usually escrow items and don’t change just because the interest rate changes. Fees vary by lender and region; discount points “buy down” the rate but add upfront cost. A prepayment penalty on the old loan, if applicable, should be added to the cost side. If you plan to move or refinance again soon, a long break-even horizon can make a refinance less compelling even if the payment drops.

Tips: Compare scenarios by toggling “roll costs” on/off; try a shorter new term to cut total interest; and pick a realistic hold period for your plans. This tool is educational—not advice—and ignores taxes and itemized deductions, which can affect your after-tax cost of borrowing.