Refinance Break-Even Calculator Methodology

The calculator compares keeping the current loan with refinancing into a new loan. It estimates monthly principal and interest payments, closing costs, discount points, lender credits, break-even timing, interest paid, balances, and total cost at the selected horizon.

If you enter a current monthly principal and interest payment, the calculator uses that payment. If you leave it blank, it estimates the payment from the current loan balance, current interest rate, and years remaining.

The new payment is estimated from the new loan amount, new interest rate, and new loan term. The calculator uses a standard amortized loan formula.

payment = principal * (monthlyRate * (1 + monthlyRate)^payments) / ((1 + monthlyRate)^payments - 1)

Closing costs can be entered as a dollar amount or as a percentage of the current loan balance. Discount points are estimated as a percentage of the base new loan amount. Lender credits reduce the entered cost estimate.

If closing costs are financed, the net refinance cost is added to the new loan amount instead of being treated as upfront cash. This can reduce immediate cash needs, but it increases the new balance and can change the payment and interest path.

For a cash-out refinance, the entered cash-out amount is added to the base new loan amount. The calculator shows cash-out scenarios separately because they add debt rather than simply lowering the rate on the same balance.

The calculator simulates both loans month by month. For each month, it compares the cumulative payments made plus the remaining balance. For the refinance path, any upfront cash cost is included. The first month where the refinance path is no more expensive than the current-loan path is the estimated break-even month.

The default comparison uses how long you plan to keep the home or loan. If you choose to compare over the full new loan term, the modeled horizon expands to the new loan term. Break-even matters more when you may sell, move, or refinance again before the refinance has recovered its costs.

This MVP does not include exact lender underwriting, exact refinance eligibility, mortgage insurance changes unless entered separately, tax deductions, escrow changes, appraisal differences, prepayment penalties, state and local fee variations, credit score effects, or professional mortgage advice.

These calculators are for educational purposes only and are not financial, tax, legal, insurance, investment, real estate, employment, medical, childcare, vehicle-buying, or professional advice.

This calculator focuses on principal, interest, closing costs, loan balance, and planned timeline. Taxes, insurance, HOA dues, and escrow changes may affect real-world cash flow. This calculator is educational only and is not mortgage, tax, legal, financial, or professional advice.