Refinance Break-Even Calculator (When Does a New Loan Pay Off?)
Monthly payment on the current and the new loan, how much you save each month, and how many months it takes for that saving to repay the refinancing costs.
Results
What this tool does
Refinancing swaps your remaining balance for a new loan at a new rate and term, usually for a fee. The break-even point is the fees divided by the monthly saving: if you will keep the loan, and the home or asset, for longer than that, you come out ahead. Watch the term: stretching the repayment over a longer period lowers the payment but can raise the total paid, which is why the last line compares the total over both full terms, fees included. A negative number there means the new loan costs more overall even if the monthly payment is lower.
Formula
PMT = B × i ÷ (1 − (1+i)^−n) · break-even = costs ÷ (old PMT − new PMT)
Variables
| Symbol | Meaning | Unit |
|---|---|---|
bl | Balance still owed | — |
r1 | Current interest rate (annual) | % |
m1 | Months left on the current loan | — |
r2 | New interest rate (annual) | % |
m2 | Term of the new loan (months) | — |
cc | Fees and closing costs of refinancing | — |
BE | Months to recover the costs (0 if the payment does not fall) | months |
P1 | Current monthly payment | — |
P2 | New monthly payment | — |
SV | Monthly saving | — |
TD | Total paid over both full terms: saving (+) or extra cost (−) | — |
Worked example
- Balance still owed200,000
- Current interest rate (annual)6.5 %
- Months left on the current loan300
- New interest rate (annual)5 %
- Term of the new loan (months)300
- Fees and closing costs of refinancing3000
- Months to recover the costs (0 if the payment does not fall)16.6 months
- Current monthly payment1350.41
- New monthly payment1169.18
- Monthly saving181.23
- Total paid over both full terms: saving (+) or extra cost (−)51,370
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.