Refinance
break-even
Break-even is closing costs divided by monthly payment savings. It tells you how long you need to stay in the loan before the refinance pays for itself.
The formula
If closing costs are $6,000 and the new payment is $150 lower, break-even is 40 months. If you sell or refinance again before then, you may not recoup the cost.
Lower payment is not always savings
Stretching the term lowers the payment but can increase total interest. Compare the interest change, not only the monthly difference.
What to count as costs
Include lender fees, appraisal, title and recording. Rolled-in costs still count economically, even if they are not paid at closing.
FAQ
How is break-even calculated?
Closing costs divided by monthly payment savings, in months.
Does a lower rate always make sense?
No. The break-even period, remaining time in the home and total interest all matter.
Estimate only; not a loan offer or financial advice.