Should You Refinance? The Break-Even Rule That Settles It

Published 2026 ? 4 min read

Refinancing sounds good ? lower rate, lower payment. But closing costs make it a math problem, not a feeling. The only number that matters is the break-even point.

The break-even rule

Take your closing costs and divide by your monthly savings. If refinancing costs $6,000 and saves you $150 a month, you break even in 40 months. If you'll move before then, refinancing loses money even at a lower rate.

Watch the term trap

A 30-year refinance of a loan that had 25 years left resets the clock. Your payment drops, but you'll pay interest for five extra years. Compare the total interest, not just the monthly payment.

When refinancing makes sense

• You'll stay past the break-even point.
• Rates dropped meaningfully (a half point or more).
• You want to switch from adjustable to fixed.
• You're consolidating higher-interest debt into the mortgage.

Run the numbers

Use the refinance calculator ? enter your balance, old and new rates, term and closing costs, and it shows your monthly savings and exact break-even month.