Is monthly payment reduction enough to justify refinancing?

Not always. A lower payment can still increase total interest if the new term is much longer or if closing costs are high.

What is a simple break-even formula?

Break-even months equals total closing costs divided by monthly payment savings, assuming savings are positive.

How does planned move timing affect the decision?

If you expect to sell or refinance again before break-even, refinancing usually does not recover upfront costs.

Refinance Break-Even Guide

Use this framework to decide whether a refinance is actually worth doing.

Core formula

Start with the simplest test:

Break-even months = Closing costs / Monthly payment savings

If monthly savings are zero or negative, there is no payment-based break-even.

Adjust for term reset risk

A lower rate can still cost more overall if the new loan restarts a long repayment schedule. Compare remaining total cost on your current loan against the proposed loan plus closing costs.

Compare equal hold periods, not just monthly payment
Check total interest remaining under each path
Watch for cash-out refinance tradeoffs

Match refinance to your hold period

Break-even only matters if you expect to keep the loan long enough. Include your likely move date and probability of another refinance.

If expected hold period is shorter than break-even, skip or renegotiate costs
If hold period is longer, assess net savings margin after uncertainty
Re-run analysis when rates or fees change

Quick decision checklist

Payment savings are meaningful and positive
Break-even is well inside your expected hold period
Total remaining-term cost is lower, not just monthly payment
You keep adequate cash reserves after paying closing costs

Run the Numbers

Use the Refinance Break-Even Calculator to estimate break-even timing and remaining-term impact, then validate your current payment mix in the Mortgage Calculator.