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.
One safeguard before you commit: get the actual numbers in writing. Lenders advertise their best rates, but the rate and fees you are approved for depend on your credit, the home's value and current pricing. Run the calculator once with the lender's real figures - not the advertised ones - and if the break-even still fits your plans, the refinance is a sound financial move rather than a guess.