Refinancing can lower your monthly payment — but it also costs money upfront. The only real question is whether the savings catch up to that cost before you sell or move. Here's how to think it through.
Every refinance has two sides: what it costs you upfront (closing costs, lender fees, appraisal, title work — often $3,000 to $10,000+), and what it saves you every month afterward, if your new payment is lower than your old one.
Your break-even point is simply: refinance cost ÷ monthly savings = months to break even. If refinancing costs $9,500 and saves you $349 a month, you break even in about 27 months — a little over two years. Every month after that is money back in your pocket. Every month before that, you're still paying off the cost of getting the new loan.
Rule of thumb: if you plan to stay in the home longer than your break-even point, refinancing tends to make sense. If you might sell or move before that point, it usually doesn't.
A lower rate always sounds good, but a lower rate with high closing costs can actually leave you worse off if you don't stay long enough to recoup them. Two refinances that both lower your rate by the same amount can have very different break-even timelines depending on the fees attached — so the rate alone isn't the full picture.
The math above only takes three numbers: your current payment, your new payment, and the cost to refinance. Plug in your own figures and see your exact break-even point instantly.
Try the free break-even calculator →