Mortgages2 min read · Updated October 19, 2026
When refinancing pays off: closing costs and break-even
How to tell if refinancing your mortgage saves money after closing costs, with a worked example and the break-even rule.
The break-even rule
Closing costs divided by monthly savings gives the months to get your money back. $6,000 divided by $240 is about 25 months on payments alone. Counting interest month by month, the full break-even is 25 months.
The example
| Payment on current loan | $2,039 |
| Payment on new loan | $1,799 |
| Interest over 7 years, current | $140,068 |
| Interest over 7 years, new | $120,005 |
| Closing costs | $6,000 |
| Net saving over 7 years | $14,064 |
Watch the term
If you refinance 20 years left into a new 30-year loan, the payment falls but you pay for ten more years. Pick a term that matches how long you have left, or keep paying the old amount.
How long you will stay
If you may move in three years, a 25-month break-even is tight. Be honest about how long you will keep the loan.
Common questions
How do I calculate refinance break-even?
Divide closing costs by your monthly saving. For a fuller answer, compare the interest you would pay over the years you will keep the loan.
How much does it cost to refinance?
Commonly 2% to 5% of the loan amount. Your Loan Estimate lists the actual figure.
Is a 1% lower rate worth it?
Often, if you stay past the break-even. Use the calculator with your numbers.