Break Even Refi Calculator

Determining when to refinance your mortgage can be complex, but our break even refi calculator simplifies the process. By comparing the costs and savings of refinancing against your current mortgage, you can make an informed decision about whether and when to refinance.

What is a Break Even Refi?

A break even refinance point is the time when the savings from refinancing your mortgage equal the costs of refinancing. This calculation helps you determine whether refinancing is financially beneficial at a specific point in time.

Key factors that affect your break even refinance point include:

Current mortgage interest rate
New mortgage interest rate
Refinancing fees
Current loan balance
Length of time until refinancing

Important Considerations

While the break even point is a useful metric, it doesn't account for other factors like property value appreciation, tax benefits, or changes in your financial situation. Always consider these factors when deciding whether to refinance.

How to Use This Calculator

Our break even refi calculator is designed to be simple and straightforward. Follow these steps to get your results:

Enter your current mortgage interest rate
Enter the new mortgage interest rate you're considering
Enter your current loan balance
Enter any refinancing fees you expect to pay
Click "Calculate" to see your break even refinance point

The calculator will display the number of months until your refinancing breaks even, along with a chart showing the savings over time.

Formula Used

Break Even Refinance Formula

The break even point (in months) is calculated using the following formula:

Break Even Months = (Refinancing Fees) / (Monthly Savings)

Where:

Monthly Savings = (Current Rate - New Rate) × Loan Balance / 12
Current Rate is your current mortgage interest rate
New Rate is the new mortgage interest rate you're considering
Loan Balance is your current mortgage balance

This formula helps you determine how long it will take for the savings from refinancing to cover the costs of refinancing.

Worked Example

Let's look at an example to see how the break even refi calculator works.

Input	Value
Current Interest Rate	5.5%
New Interest Rate	4.5%
Current Loan Balance	$250,000
Refinancing Fees	$3,000

Using these inputs, the calculator would determine:

Monthly savings: $750
Break even point: 4 months

This means that after 4 months, the savings from refinancing would cover the $3,000 in fees.

Frequently Asked Questions

What is the difference between a break even refi and a payoff refi?: A break even refi calculates when the savings from refinancing equal the costs, while a payoff refi calculates when refinancing will pay off the loan faster.
Should I refinance if the break even point is longer than my planned stay in the home?: If the break even point is longer than your planned stay, refinancing may not be financially beneficial. Consider other factors like property value appreciation and tax benefits.
Does this calculator account for property tax savings?: No, this calculator focuses on interest rate savings and refinancing fees. Property tax savings would need to be calculated separately.
Is it better to refinance with a lower interest rate or a shorter loan term?: The break even point calculation is primarily affected by interest rate differences. Shorter loan terms can reduce monthly payments but may not always result in a faster break even point.
How often should I check my break even refi point?: You should review your break even refi point whenever there are significant changes in interest rates, your loan balance, or refinancing fees.