Refinance Break-Even Calculator

Refinancing may lower the payment, change the payoff schedule, and require closing costs. Compare all three over the time you expect to keep the home.

Break-even — the recovery clock

The calculator finds the first full month when the difference in payments and remaining balances covers the closing costs. The result can change after that month as the loans amortize.

Net savings — the dollar verdict

The secondary headline compares payments made and balances still owed over your planned stay, less closing costs. It stops counting payments when each loan is paid off. It excludes taxes, insurance, and any future refinance.

When does refinancing actually pencil?

The classic 0.5% to 1% rate-drop rule of thumb is a starting filter, not an answer. On a $400K loan a 0.5% drop saves roughly $130-160/month. A payment-only estimate would divide closing costs by that saving, but it would overlook changes in principal and payoff timing. Always run your actual numbers.

Other things that move the math: lender credits (negative closing costs in exchange for a slightly higher rate, which can pencil for short-hold scenarios), impound-account refunds from your old lender (gets credited at closing), and any shortened term that increases the principal-payment portion even though the rate is lower.

The term-reset trap (and when to avoid it)

If your current loan has 22 years left and you refinance into a fresh 30-year, your monthly payment drops twice — once from the lower rate, once from re-amortizing across more months. That feels great, but you have effectively added 8 years of interest payments to the schedule. The lifetime-interest comparison in the breakdown panel makes this visible. If you plan to keep the home all the way to payoff, consider refinancing into a 20-year — or even a 15-year — instead. Both keep your payoff date at or ahead of where it sits today. The monthly payment will be higher than the 30-year refi, and on a 15-year it will often land above what you are paying now, since you are compressing the balance into far fewer payments. Compare both terms against your current payment before you choose.

Texas Section 50(a)(6) cash-out has different rules

A rate-and-term refinance (this calculator's scenario) keeps your existing loan structure and just lowers the rate. A cash-out refinance pulls equity out and increases the loan balance — and in Texas, cash-out on a homestead is governed by Section 50(a)(6) of the state constitution. The rules: closing costs capped at 2% of the loan amount (with carve- outs for appraisal, title, survey, etc.), 80% LTV maximum, 12-day cooling-off period before closing, and only one 50(a)(6) per 12 months. Once a loan is a 50(a)(6), it stays one for life unless you refinance into a non-50(a)(6) and immediately pay all the cash out — most borrowers cannot. For a cash-out scenario, talk to us directly so the structural constraints get factored in correctly.