Break-even is the wrong question on its own
Almost every refinance calculator answers one question: how many months of lower payments does it take to recover the closing costs? That number matters — if you expect to sell or refinance again before you reach it, the deal loses money — but on its own it is misleading, because it can be short and attractive on a refinance that costs you far more in the end.
The reason is the term reset. Refinancing a mortgage you have already paid down for six years into a fresh thirty-year loan spreads a smaller balance over more months than you had left. The payment falls, sometimes sharply, and the break-even looks excellent. But you have just added years of interest payments, and the total can rise even though the rate fell. This calculator reports the lifetime figure next to the break-even month, and says so plainly when the two disagree.
What isn't included here
This compares interest and closing costs. It does not model the tax treatment of mortgage interest, private mortgage insurance coming off as equity builds, cash taken out at closing, or the value of switching between a fixed and an adjustable rate. It also assumes you keep the new loan to term, which most people do not — the median mortgage is refinanced or paid off well before maturity, which pushes the real answer back toward the break-even month and away from the lifetime figure.
One thing worth doing before deciding: run the same balance and rate through the extra payment calculator. If the goal is paying less interest overall, putting the equivalent of the closing costs straight against principal sometimes beats refinancing outright, with no application and no paperwork.
Frequently asked questions
What is the break-even point?
The number of months of lower payments needed to recover what the refinance cost you upfront — closing costs divided by the monthly saving. If you sell or refinance again before that point, the refinance lost money.
Can a refinance lower my payment but cost more overall?
Yes, and it is common. Resetting a part-paid 30-year loan back to a fresh 30 years lowers the payment by stretching the balance over more months, which can increase total interest even at a lower rate.
Should I roll the closing costs into the loan?
It avoids paying cash upfront, but you then borrow and pay interest on those costs for the life of the loan. There is no break-even month because nothing was paid upfront — the cost shows up in total interest instead.