Refinance Breakeven Rate Calculator

Refinance costs recoup through rate savings — breakeven math informs timing.

Loan balance

Current rate %

Refi costs %

Expected holding years

Breakeven rate %

0.060%

Required reduction bps

Refi costs

$500,000

How the math works

Refi costs = balance × cost %. Required annual savings = costs / years. Required reduction = savings / balance.

$20M × 2.5% = $500k costs / 5 yrs = $100k/yr saving / $20M = 0.5% rate reduction. Breakeven = 6.0%.

How to Use

Enter loan balance.
Enter current rate %.
Enter refi costs %.
Enter expected holding years.
Read breakeven rate.

Frequently Asked Questions

Breakeven logic?

Savings per year × years = refi costs. Required savings per year = costs / years. Required rate reduction = savings / balance. Anything below breakeven rate is profitable refinance.

Typical refi costs?

1.5-3% of loan amount (origination + title + appraisal + legal + survey). Prepay penalty on existing loan (if applicable). Defeasance on CMBS (often 20-40% of balance). All-in cost 2-8% depending on existing loan type.

When refi makes sense?

Rate improvement 50-100+ bps. Cash-out at maturity approach (extract equity). Change from recourse to non-recourse. Better covenants. Extend term. Consolidate multiple loans. Holding period justifies cost.

How does this interact with the rest of the capital stack?

Each tier of the stack affects the next. Senior debt constrains LTC and DSCR. Mezz and pref consume equity spread. Interest rate hedges protect DSCR but cost premium. Always model the full stack holistically — optimizing one tier alone often degrades another. Institutional underwriters run three or four scenarios across the stack before committing capital.