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Refinancing

Refinance break-even: how to know if it's worth it

By Lorrie Haran, Mortgage Loan Officer · NMLS #1333991 · October 7, 2026

To check whether a refinance is worth it, divide your total closing costs by your monthly savings. The result is the number of months until you break even. If you expect to stay in the home, and keep the new loan, longer than that, the refinance may make sense. If not, it probably does not.

The simple break-even formula

Total closing costs ÷ monthly savings = months to break even.

Example with round numbers: if a refinance costs $6,000 in closing costs and lowers your payment by $150 a month, it takes 40 months to break even ($6,000 ÷ $150). If you plan to stay five years, you come out ahead. If you may move in two, you do not.

These figures are an illustration only. They are not a quote or an offer.

Look beyond the monthly payment

A lower payment is not the same as saving money. Check these too:

  • Loan term: restarting a 30-year term can lower your payment while increasing the total interest you pay.
  • Cash out: a cash-out refinance replaces your loan with a larger one. Be clear about what the money is for.
  • Fees: compare the total costs, not just one line.

When not to refinance

  • You expect to sell or move before the break-even point.
  • Your savings are small compared to the costs.
  • You are close to paying off the loan and would be restarting the clock.
  • You would be taking cash out for something that will not hold its value.

How to run your own numbers

Ask for a Loan Estimate for the new loan, which spells out the costs and terms in a standard format. Then compare it with your current loan side by side, including how long you plan to stay.

Any rate or payment a lender shares with you should come with the APR and the required terms. Our refinance page and FAQ cover more of the basics.

Common questions

Should I roll closing costs into the new loan?

You can, but then you borrow and pay interest on those costs, which pushes your break-even point out. It is worth comparing both ways.

Does resetting my loan term matter?

Yes. Starting a new 30-year term can lower your payment while increasing the total interest you pay over time. Ask for a comparison of total cost, not just the monthly payment.