Mortgage Refinance Break-Even Calculator
Say you refinance a $300,000 balance from 7.75% to 6.28% with $7,500 in closing costs. The payment drops by about $336.20 a month. So you break even in 23 months, about 1.9 years.
Rates here start at the Freddie Mac PMMS average for the week of October 1, 2026: 7.28% on a 30-year fixed and 6.6% on a 15-year fixed. That survey is an average. It reflects borrowers with strong credit and about 20% down. Your quoted rate can be higher or lower. The 2026 conforming loan limit (FHFA) is $832,750 in most counties and up to $1,249,125 in high-cost areas.
How the refinance break-even is calculated
Break-even months = closing costs ÷ monthly payment savings. That's the whole formula. Will you keep the home and the new loan longer than that? Then the refinance pays for itself in cash flow. The payment math is the same amortization formula as any mortgage. It just runs on your current balance twice: once at the old rate, once at the new rate.
- Current payment on $300,000 at 7.75% over the 28 years left: $2,189.21.
- New payment on $300,000 at 6.28% over 30 years: $1,853.01.
- Monthly savings: $2,189.21 − $1,853.01 = $336.20.
- Break-even: $7,500 ÷ $336.20 = 22.3 → 23 months.
Watch the term. A new 30-year loan stretches payments 2 years past your current payoff date. Remaining interest goes from $435,574 to $367,083. That's not a small detail.
A 28-year term instead keeps the same payoff date. The payment would be $1,898.69. Break-even would be 26 months. You'd save about $90,116 in interest after closing costs.
Break-even by rate drop
A $300,000 balance at 7.75% with 28 years left. It's refinanced into a new 28-year loan with $7,500 in costs.
| New rate | New payment | Monthly savings | Break-even |
|---|---|---|---|
| 7.5% (−0.25) | $2,138.60 | $50.61 | 149 mo |
| 7.25% (−0.5) | $2,088.47 | $100.74 | 75 mo |
| 7% (−0.75) | $2,038.83 | $150.38 | 50 mo |
| 6.75% (−1) | $1,989.68 | $199.53 | 38 mo |
| 6.25% (−1.5) | $1,892.94 | $296.27 | 26 mo |
| 5.75% (−2) | $1,798.35 | $390.86 | 20 mo |
Frequently asked questions
How much does it cost to refinance a mortgage?
Closing costs on a refinance include lender fees, appraisal, title insurance and recording fees. They vary by lender and by state. Your Loan Estimate lists them. Use that total in the calculator.
Is a 1% rate drop worth refinancing?
In this example it breaks even in 38 months. Is that worth it? It depends on how long you'll keep the loan. It also depends on the closing costs and on whether you reset the term.
Does rolling closing costs into the loan change the break-even?
Yes. You don't pay cash up front. But you borrow more and pay interest on the costs. So the real break-even comes a bit later than costs ÷ savings.
What about a cash-out refinance?
A cash-out refi raises your balance. So the payment may not drop at all. Don't judge it by break-even. Judge it by the total cost of the cash you take out.
Related calculators
Sources
- Freddie Mac, Primary Mortgage Market Survey (week of October 1, 2026)
- FHFA, Conforming Loan Limit Values for 2026
- HUD, FHA Mortgage Limits lookup
- CFPB, What is a debt-to-income ratio?
- CFPB, When can I remove private mortgage insurance (PMI)?
- Freddie Mac, Breaking down PMI
- HUD Mortgagee Letter 2023-05 (FHA annual MIP reduction)
Updated: October 2, 2026 · Sources and methodology