Refinance Break-Even

Loans & Borrowing
Updated Apr 2026 • Has calculator

The number of months until monthly savings from refinancing recover the closing costs.

What is Refi Break-Even?

The refinance break-even point is the number of months it takes for cumulative monthly payment savings from a lower interest rate to equal the upfront closing costs of refinancing. If you plan to stay in the home beyond this point, refinancing is financially beneficial. Closing costs typically run 2–5% of the loan balance, covering lender fees, appraisal, title insurance, and origination charges.

Formula

Break-Even Months = Closing Costs ÷ Monthly Savings

Worked Example

Worked example — Homeowner refinancing in 2024

2024

Step 1  Existing balance: $280,000 at 7.50%
Step 2  Old payment: ~$1,957/mo (30-yr fixed)
Step 3  New rate: 6.50% | New payment: ~$1,770/mo
Step 4  Monthly savings: $1,957 − $1,770 = $187/mo
Step 5  Closing costs: $5,600 (2% of balance)
Step 6  Break-even = $5,600 ÷ $187 = 30 months (2.5 years)
Step 7  → If you stay 3+ years, refinancing saves money

Source: Freddie Mac Primary Mortgage Market Survey 2024 (2024-09-01)

Calculate Refi Break-Even

Your existing mortgage interest rate

Proposed refinanced mortgage interest rate

Remaining principal balance on your current mortgage

Estimated refi costs (typically 2–3% of loan balance)

Term for the new refinanced mortgage

Break-Even Period

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Not investment advice.

How to Interpret Refi Break-Even

< 12
Break-even < 1 year — refinance is a clear win
12 – 24
1–2 years — good deal if you plan to stay
24 – 48
2–4 years — worthwhile for most homeowners
> 48
Over 4 years — only worthwhile if staying long-term
Sources
  1. Freddie Mac — Refinancing Basics
  2. Consumer Financial Protection Bureau — Refinance Calculator
  3. Investopedia — Refinancing