How Refinance Break-Even Works
A refinance break-even point is the time it takes for your monthly savings to “pay back” the refinance closing costs. If you plan to move or sell before the break-even month, refinancing may not be worth it.
Break-even formula:
Break-even months = Closing costs ÷ Monthly payment savings
Break-even months = Closing costs ÷ Monthly payment savings
What Counts as “Closing Costs”?
- Lender fees (origination, underwriting, processing)
- Appraisal, title, recording, and settlement costs
- Points (if you pay them) — include them in closing costs for accurate break-even
When Break-Even Can Be Misleading
- Loan term resets: a lower payment can still cost more interest over time.
- Escrow changes: taxes/insurance may change after refinance.
- Financed costs: rolling closing costs into the loan reduces cash today but can increase interest.
Related Calculators
- APR Calculator – understand true borrowing cost.
- Closing Costs Calculator (US) – estimate fees and cash to close.
- Loan Calculator – explore payment math and scenarios.
Frequently Asked Questions
1) What is a refinance break-even point?
It’s how many months it takes for your monthly savings to equal your refinance closing costs.
2) Should I use PI or total payment (PITI)?
PI is usually best because taxes and insurance can change and aren’t always affected by refinancing.
3) What if my new payment is higher?
If the new payment is higher, you don’t break even (your monthly “savings” is negative).
4) Do points count in break-even?
Yes. Treat points as part of closing costs when calculating break-even.
5) If I break even, does that guarantee refinancing is good?
No. You should also consider total interest over time, how long you’ll stay, and whether your term changes.