Published by RVR — Founder & Editor, IQlatorMethodology reviewed September 24, 2026Educational information
Evaluate refinancing with a break-even and time-horizon test
Refinancing replaces an existing loan with a new one. A lower payment can result from a lower rate, a longer term or both. The decision should compare closing costs, remaining interest, the new payoff date and how long the borrower expects to keep the loan.
How to use this page
The calculator estimates the new payment and divides eligible upfront costs by monthly savings to approximate a simple break-even period. A fuller comparison also considers interest already paid, term extension, cash taken out and costs added to the new balance.
Practical exampleIf closing costs are $4,000 and monthly savings are $160, the simple break-even is 25 months. Selling or refinancing again before that point may prevent the monthly savings from recovering the upfront expense.
Inputs to verify
- Compare the new term with the remaining term on the current loan.
- Separate true lender costs from prepaid tax, insurance and escrow adjustments.
- Check whether points are being paid to obtain the advertised rate.
Common questions
Is a lower monthly payment always savings?
No. Extending repayment can lower the payment while increasing the total amount paid.
Should costs added to the loan count?
Yes. Financing costs increases principal and can create interest on those costs.
Methodology and sources: Educational break-even estimate. Use lender disclosures and tax advice for the actual transaction.