How it works
Use your current balance and remaining term, not the original loan term. Enter the new fixed rate, new repayment term and closing costs paid upfront. The principal is unchanged; this is a rate-and-term comparison with no cash-out and no financed fees.
Formula
ΔM = M₁ − M₂; Simple cash-flow break-even (months) = Upfront refinance costs ÷ ΔM (ΔM > 0).
Worked example
For a 250,000 balance at 7% with 25 years left, refinancing to 6% over 25 years with 4,000 upfront costs reduces the modeled payment by $156.19. Simple cash-flow break-even is 25.6 months.
Assumptions and limitations
Break-even is upfront costs divided by a positive monthly payment reduction. It is not a full economic comparison: extending the term can lower payments and increase lifetime interest. Compare remaining payment totals too. Taxes, insurance, mortgage insurance, penalties, rate changes, time value of money and property-sale timing are excluded.
Local rates and lending rules
Enter a lender’s nominal interest rate, not APR. This model divides it by 12 and assumes monthly payments. Fees, eligibility, compounding conventions and tax rules vary by country.
Sources and methodology
- CFPB — Principal, interest and total monthly payment
- CFPB — Understanding a Loan Estimate
- CFPB — Debt-to-income ratio
- CFPB — Compare loan offers
Sources checked 2026-10-26
Frequently asked questions
Does a lower payment always mean refinancing costs less?
No. A longer repayment period or large closing costs can make the total higher. The result shows both monthly cash flow and full-term payments, but does not predict how long you will keep the loan.
Amounts are illustrative. Not financial advice or a lender quote.