A refinance break-even calculator that tells you how many months it takes for a lower rate to recover the closing costs of refinancing or remortgaging. Essential before you remortgage: if you’ll move or repay before break-even, the switch costs you money.
How it works
The tool prices both loans over the same remaining term using the amortising payment formula M = P · r ⁄ (1 − (1+r)⁻ⁿ), where r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the months remaining. It computes the payment at your current rate and at the new rate on the same balance, takes the difference as the monthly saving, then divides the closing costs by that saving:
Break-even months = closing costs ⁄ monthly saving
The result is rounded up to a whole month. If the new rate doesn’t lower the payment, there’s no saving and no break-even.
Example
A £250,000 balance with 30 years remaining, refinancing from 6.5% to 5.0% with £4,000 in costs:
- Payment at 6.5%: about £1,580/month
- Payment at 5.0%: about £1,342/month
- Monthly saving: about £238
- Break-even: £4,000 ÷ £238 = about 17 months
| Closing costs | Monthly saving | Break-even |
|---|---|---|
| £2,000 | £200 | 10 months |
| £4,000 | £238 | 17 months |
| £6,000 | £150 | 40 months |
If you plan to sell or move before the break-even point, refinancing may not be worth it. Everything runs in your browser.