Mortgage Refinance Calculator: Break-Even Point and Lifetime Savings

Compare your current mortgage with a new loan to see how much a refinance saves each month, how long it takes to earn back the closing costs and whether you come out ahead over the life of the loan. Refinancing a $300,000 balance with 28 years left from 8.25% to the 7.40% average 30-year rate (Freddie Mac, October 8, 2026) cuts principal and interest from $2,291.79 to $2,077.14, a saving of $214.65 a month. With $6,000 of closing costs you break even after 28 months.

How the break-even point is calculated

• Each payment uses the standard fixed-rate formula: payment = L × r ÷ [1 − (1 + r)⁻ⁿ], where L is the loan amount, r the monthly rate and n the number of payments.
• Monthly savings = current payment − new payment
• Break-even point = closing costs ÷ monthly savings, rounded up to a whole month. $6,000 ÷ $214.65 = 27.95, so 28 months.
• Lifetime difference = all remaining payments on the current loan − (all payments on the new loan + closing costs paid in cash).

The break-even point answers the question most people care about: if you sell or refinance again before that month, the refinance cost you money. The lifetime figure adds the second question: whether stretching the loan back out to 30 years costs more interest in the end, even at a lower rate.

Mortgage rates right now

Freddie Mac’s weekly survey put the average 30-year fixed rate at 7.40% and the 15-year fixed rate at 6.73% on October 8, 2026. Your own offer depends on your credit score, equity, loan size and any points you pay, so use a rate from a Loan Estimate if you have one.

Four refinance scenarios

The 15-year option raises the payment but saves the most interest, because the loan is repaid 13 years sooner. The last row shows why refinancing to a higher rate only makes sense for another reason, such as taking cash out or removing a borrower.

When refinancing makes sense

• You expect to keep the home, and the loan, for longer than the break-even period.
• The new rate is low enough that the savings cover the costs well before you might move.
• You can afford to keep the term the same or shorter. Restarting a 30-year clock adds years of interest, so compare the lifetime figure, not just the monthly saving.
• Your current loan has no prepayment penalty, or the penalty is included in the closing costs you enter.

Rolling the closing costs into the loan saves cash today, but you pay interest on them for the whole term, which lowers the monthly saving and stretches the break-even point. Freddie Mac also points out that a no-cost refinance usually comes with a higher rate or rolled-in costs: there is no such thing as a free loan.

Your right to cancel

When you refinance the mortgage on your main home with a new lender, federal law (Regulation Z) generally lets you cancel until midnight of the third business day after closing, or after you receive the required notice and disclosures if that is later. A refinance with your current lender is exempt unless you borrow more than the existing balance plus the costs of the refinance.

FAQ

Should I pay closing costs upfront or add them to the loan?

Paying in cash gives a lower payment and a quicker true break-even. Adding them to the loan keeps cash in your pocket. Tick the box in the calculator to see both: in the example, rolling the costs in cuts the monthly saving from $214.65 to $173.11.

Does the break-even point include the principal I pay off?

No. This is the simple break-even most lenders quote, based on the change in the monthly payment. A lower rate also means more of each payment goes to principal, so the true break-even is often a little sooner. The lifetime figure captures the full effect.

How much lower does the rate need to be?

There is no fixed rule. What matters is the size of the saving compared with the costs and how long you will keep the loan. A small rate cut on a large balance can pay off, while a bigger cut on a small balance might not.

Can I refinance to a shorter term?

Yes. Choose 15 or 20 years. The payment may go up, but you pay off the loan sooner and pay far less interest overall.

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Sources

• Freddie Mac Primary Mortgage Market Survey: Mortgage rates average 7.40% · October 8, 2026
• Freddie Mac: Refinancing your mortgage FAQ
• eCFR: 12 CFR 1026.23, right of rescission (Regulation Z)
• NerdWallet: How to calculate the break-even point on a mortgage refinance