Mortgage refinance break-even calculator

Refinance break-even — the only number that matters

If the lender's pitch is "you save $300/month!" without quoting the break-even period, walk away. A $300/mo savings funded by $9,000 in closing costs is a 30-month break-even. If you sell or refi again before then, you lost money.

The right framework

break-even months = closing costs ÷ monthly savings

A few rules of thumb:

• < 24 months: refinance immediately, almost always worth it
• 24-48 months: refinance if you're confident you'll stay in the home longer than the break-even
• > 48 months: usually not worth it; rates would have to keep falling for it to pay off

What the simple math misses

1. Lifetime interest — refinancing a 27-year-old loan into a fresh 30-year resets the amortization. Your monthly payment drops, but you pay more total interest. Always check the lifetime interest column.
2. Roll vs pay closing costs — rolling them into the loan means $0 break-even but a higher principal. Out-of-pocket gives a finite break-even but requires cash today.
3. Tax deduction lost — if you itemize, mortgage interest deductions decrease as your interest decreases. For high earners in CA/NY, this can swallow 20-30% of the apparent savings.
4. Opportunity cost of closing costs — $6,000 paid up front could have earned 4-5% in a HYSA or T-bill. Add this to the effective break-even.

When NOT to refinance even if break-even looks good

• You plan to sell within the break-even period
• You're already 25+ years into a 30-year loan (you'd lose interest deductions and reset amortization for negligible savings)
• The new loan has a prepayment penalty (kills cash-out flexibility)
• You're refinancing to consolidate debt (avoid this — see HELOC instead)