Mortgage Refinance Breakeven Calculator

When mortgage rates drop, refinancing can lower your monthly payment and save thousands in interest, but only if you keep the loan long enough to make up the closing costs. This calculator finds your break-even point and shows your savings by the time you expect to move.

What this calculator does

Enter your current loan balance, rate and months remaining, the new rate and term, closing costs and how many years you expect to keep the home. It shows:

• the months to break even,
• your monthly payment savings,
• your new principal and interest payment,
• your net savings by the time you move, and
• the change in total interest over the life of each loan.

The formula in plain English

Current payment = the standard payment on your balance at your current rate for the months remaining.

New payment = the standard payment on the same balance at the new rate and term.

Monthly savings = current payment − new payment.

Break-even = closing costs ÷ monthly savings, rounded up to whole months.

Net savings by the time you move = monthly savings × months you'll stay − closing costs.

Lifetime change = total remaining interest on the current loan − total interest on the new loan − closing costs.

A worked example

Dr. Price owes $420,000 at 7.25%, with 28 years left. She can refinance to 6.25% for 30 years, with $7,500 in closing costs. She expects to stay 7 years.

• Current payment: about $2,924.
• New payment: about $2,586.
• Monthly savings: about $338.
• Break-even: about 23 months.
• Net savings after 7 years: about $20,900.
• Lifetime interest savings: about $44,000, even after closing costs and the extra two years.

If she kept making her old $2,924 payment on the new loan, she'd pay it off well before 28 years and save even more.

Why it matters at each career stage

If you're: Resident / fellow

If you bought during training and plan to move for your first job, refinancing rarely pays off. Focus on whether you'll keep the home.

If you're: Employed

If you bought with a high rate after training, watch for rate drops of about 0.75% or more and run this. Your higher income may also help you qualify for better terms.

If you're: Practice owner

Lenders often average two years of business income. If your income has risen, refinancing may get you a better rate than when you first bought.

Before you refinance

Compare several lenders. Rates and fees vary a lot.

Ask about points. Paying points lowers the rate but raises upfront costs and lengthens the break-even.

Check your equity. With less than 20% equity, a conventional refinance may add PMI.

Think about cash-out carefully. Taking cash out raises your balance and risk.

Consider the term. A 15- or 20-year refinance raises the payment but saves much more interest.

No-cost refinances

Some lenders offer refinances with little or no closing costs in exchange for a slightly higher rate. Because there's nothing to recover, the break-even is immediate, which can make sense if you might move in a few years. If you'll stay a long time, paying closing costs for a lower rate usually saves more.

When refinancing doesn't make sense

If you'll move or sell before the break-even point, if closing costs are high relative to the savings, or if you'd restart a long term late in the loan, refinancing may cost more than it saves. Sometimes paying extra principal on your current loan is the better move.

Next, see how extra payments shorten your loan, check your full mortgage payment and read buying a home in healthcare.