Your mortgage refinance breakeven point, explained
Refinancing is not free, so the real question is when the savings catch up to what it costs you upfront. That moment is your breakeven point.
What breakeven actually means
Refinancing has upfront closing costs, and in return it lowers your monthly payment. The breakeven point is the month when your accumulated monthly savings finally equal those closing costs. Before it, you are behind. After it, every month is pure savings.
How to calculate it
Divide your total closing costs by your monthly payment savings:
- $6,000 in closing costs and $300 a month saved is a 20-month breakeven.
- The same costs with $500 saved is 12 months.
Then compare that number to how long you realistically plan to stay in the home.
What counts as a good breakeven
As a rough guide, under about two years is strong, and the longer you intend to stay, the more decisively refinancing wins. If your breakeven lands near or past your expected move-out date, it is probably not worth it.
The edge cases
- Shortening the term: your payment may rise, so simple breakeven understates the value; the win is total interest saved.
- Adjustable to fixed: you may refinance for predictability rather than pure savings.
- Cash-out: you are borrowing more, which changes both the payment and the math.