Quick answer: Refinance break-even is the month your monthly savings have paid back the closing costs. Divide the closing costs by the monthly savings and round up. In the example, $5,200 of closing costs and $185 a month in savings give break-even in month 29.
The formula
Closing costs divided by your monthly savings, rounded up to the next whole month. Use the change in your principal and interest payment. Escrow changes are a separate question, covered in our escrow articles.
Worked example (made-up numbers)
Closing costs are $5,200. Your current principal and interest payment is $1,450, and the refinance lowers it to $1,265. That saves $185 a month.
$5,200 divided by $185 is about 28.1. Round up, and break-even is month 29.
If you stay past month 29, the savings are yours. If you sell or refinance again before then, you paid the closing costs without keeping the savings long enough to cover them.
Questions people ask
Does a no-closing-cost refinance have a break-even?
Lender-paid costs are often recovered through a higher interest rate. Compare the rate and the costs together, not the costs alone.
Does the new loan term matter?
Yes. If you refinance a 30-year loan with 24 years left into a new 30-year loan, the payment falls partly because the time is longer, and you pay interest for more years. Compare the total interest on both loans, not only the monthly payment.
Does break-even include tax effects?
No. Interest and points can have tax effects that depend on your return. Check with a tax professional before you count them.
What the simple formula leaves out
- The new term. A lower payment over a longer term can cost more in total interest, as described above.
- Cash out. If the refinance adds money to the loan, the new balance is larger. The break-even on the closing costs does not show what the extra debt costs.
- Tax. The formula ignores tax effects, which depend on your situation.
Where this does not apply
If the lender covers the closing costs with a credit, the upfront cost is lower, but a credit is usually paid for through a higher rate, so compare the rate and the costs together. Adjustable-rate loans change the payment after the fixed period, so one break-even figure may not hold. Your planned move date matters more than any formula.
To run the numbers on your own refinance, use the refinance break-even check in the Free Toolbox. For how a lower payment fits your monthly plan, see the true cost of owning calculator. Planners and workbooks are on our shop page.
Last reviewed: November 3, 2026.
This article is general educational information, not financial, legal, tax or insurance advice.
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