Refinancing your mortgage isn’t free, and it’s not always the right move. One way to tell? Calculate your refinance break-even point, the moment your monthly savings catch up with your upfront closing costs. If you're not sure how to do that, this guide breaks it down in plain language so you can decide whether refinancing is truly worth it for your situation.

Let’s help you cut through the confusion, avoid costly missteps, and walk away with a clear understanding of whether a refi really makes sense.

Key Takeaways:

• Understand what a refinance break-even point is and why it matters.
• Learn how to calculate your break-even point step-by-step.
• Discover real-world examples and borrower insights.
• Avoid common refinancing pitfalls.
• Make informed decisions using tools and credible platforms.

What Is a Mortgage Refinance Break-Even Point?

Your refinance break-even point is the time (in months) it takes for your refinance savings to cover the closing costs you paid. After that point, you’re essentially in the “profit” zone.

Why it matters:

• Helps you decide if refinancing is financially smart.
• Avoid wasting money if you plan to sell or move soon.
• Empowers you to compare multiple loan offers with confidence.

Quick Formula:

Break-even point (in months) = Total Refinance Costs / Monthly Savings

How To Calculate It? (Step-by-Step)

Step 1: Know Your Costs

Your lender will charge closing costs that can range from 2% to 6% of your loan amount. These typically include:

• Loan origination fees
• Appraisal fees
• Title insurance
• Taxes and recording fees

Example:
If your loan amount is $300,000 and closing costs are $9,000, that’s your upfront investment.

Step 2: Calculate Monthly Savings

Compare your current mortgage payment with the new estimated payment.

Example:

• Current monthly payment: $2,200
• New monthly payment after refi: $1,950
• Monthly savings: $250

Step 3: Do the Math

Break-even = $9,000 / $250 = 36 months

That’s three years until your refinance pays off. If you plan to stay longer? It might be a smart move.

Compliance & Disclosures

This blog is for informational purposes only and does not constitute financial advice. Loan terms, rates, and availability are subject to change based on creditworthiness, property location, and lender requirements. Always consult with a licensed mortgage professional.

Be My Neighbor Mortgage is licensed under NMLS #1743790. For full licensing information, visit the NMLS Consumer Access site.

Partnership Disclosure: Some references in this article may relate to affiliated partners, including reAlpha. reAlpha is a commission-free real estate and financing platform.

Conclusion: Should You Refinance Now?

Refinancing can be a smart move, but only if the math works. That’s why calculating your refinance break-even point is essential. It helps you know exactly when your investment pays off.

Platforms like reAlpha make it easier by removing commission friction, so your decisions are based on your goals, not someone else’s profit. And with Be My Neighbor, you have licensed support that puts education first.

Together, we help you refinance with confidence. No pressure, just clarity.

FAQs

What is the average refinance break-even point?

It usually ranges from 24 to 36 months, depending on your loan size, interest rate difference, and upfront costs.

How do I know if I should refinance?

Use the break-even formula and compare that to how long you plan to stay in the home. If the break-even is shorter, it’s likely a good deal.

Can I refinance with bad credit?

Yes, but you may not get the lowest rates. Shop around with transparent lenders like Be My Neighbor to understand your options.

Do all lenders charge the same closing costs?

No. Lender fees vary. Always ask for a Loan Estimate and compare.

Ready to start? Compare your break-even point today. Use free calculators, consult experts, and lean on partners that work for you, not for commissions.