How the refinance break-even point works
Refinancing replaces your existing mortgage with a new one — ideally at a lower interest rate. But refinancing isn't free. You pay closing costs (typically 2%–5% of the loan amount) for things like the appraisal, title search, origination, and recording fees.
The break-even point is the number of months it takes for your monthly savings to add up to those closing costs. If you refinance and save $250 a month, and your closing costs were $6,000, you break even in 24 months. Stay in the home past that point and you're ahead. Sell or move before it, and refinancing cost you money.
The formula
Break-even (months) = Total closing costs ÷ Monthly payment savings. The calculator above also accounts for the new loan term, so you can see whether stretching back out to 30 years lowers your payment but increases the total interest you pay over the life of the loan.
Frequently asked questions
How much does it cost to refinance?
Most homeowners pay between 2% and 5% of the loan balance in closing costs. On a $300,000 loan that's roughly $6,000 to $15,000. Some lenders offer "no-closing-cost" refinances, but those typically come with a higher interest rate.
Is it worth refinancing for a 1% rate drop?
It depends on your loan size and how long you'll stay. A 1% drop on a large balance can save hundreds per month, but the same drop on a small balance may not cover closing costs before you move. Use the break-even number above as your guide.
Will refinancing restart my loan?
Usually, yes — a new 30-year refinance resets the clock. Lower monthly payments can mean more total interest over time. If keeping your payoff date matters, compare a shorter new term in the calculator.
Does checking refinance rates hurt my credit?
Comparison tools that pre-qualify you use a soft credit pull, which does not affect your score. A hard pull only happens when you formally apply with a lender.