Should I Refinance My Mortgage? (Break-Even Guide)
4 min read
A lower interest rate sounds like an easy win, but refinancing isn't free — closing costs can run a few thousand dollars. Whether it's worth it comes down to one number: your break-even point.
Here's how to decide if refinancing your mortgage makes sense.
Step by step
- 1Find your new monthly payment
Enter your current balance, the new rate, and the new term to see what your payment would become and how much you'd save each month.
- 2Add up the closing costs
Refinance costs typically run 2–5% of the loan amount — lender fees, appraisal, title, and escrow. Get a written estimate from the lender.
- 3Calculate the break-even point
Divide the closing costs by your monthly savings. If costs are $4,800 and you save $200 a month, you break even in 24 months.
- 4Compare it to how long you'll stay
If you'll keep the home longer than the break-even point, refinancing usually pays off. Use the Refinance Calculator to see the full picture, including lifetime interest.
Tips
- Refinancing into a shorter term saves the most interest but raises your monthly payment.
- Watch out for restarting a fresh 30-year term — it can increase total interest even at a lower rate.
- A 'no-cost' refinance just folds the fees into a higher rate; compare it honestly against paying costs upfront.
Frequently asked questions
Is refinancing my mortgage worth it?
It's worth it if your monthly savings recoup the closing costs before you'd sell or move. Compare your break-even point to how long you plan to stay.
How much does it cost to refinance?
Typically 2–5% of the loan amount, covering lender fees, appraisal, title, and escrow. Some lenders offer no-cost refis at a slightly higher rate.
Does refinancing restart my loan?
It can. Refinancing into a new 30-year loan resets the clock, lowering the payment but potentially raising total interest. A shorter new term avoids that.