Refinance break-even explained (without the lender spin)

Q: What is a good break-even target?

A good target is any break-even month that falls well before you expect to move or refinance again. The shorter the timeline, the more flexibility you have.

Q: Are lender credits included in break-even?

Yes. Break-even should use net closing costs, which are your costs minus any lender credits.

Q: Does break-even consider total interest?

Not by itself. Break-even focuses on recovering upfront costs, so you should also consider the total interest over the life of the loan.

Q: What if I refinance again later?

If you refinance before break-even, you likely won’t recover the costs of the current refinance. That’s why time horizon matters.

Q: Is break-even the only thing that matters?

No. It’s a useful anchor, but you should also weigh term changes, total interest, and goals like payment relief or stability.

Break-even is the month when your refinance savings finally repay the upfront costs. It’s not the whole story, but it’s the fastest way to filter out offers that won’t pay for themselves.

Use the refinance calculator to plug in your numbers, compare today's rates, and see how this fits with pages like the 0.5% rate drop guide and quote traps to avoid.

One-minute check: If break-even is more than half the time you expect to keep the loan, pause. Either fees are too high, or the rate drop is too small.

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At a glance: how to use break-even

Break-even is a timeline check, not a guarantee of total savings.
The shorter it is, the more flexible (and safer) the refinance.
Compare break-even to your likely move or refinance window.

Simple definition of break-even

Break-even is the point where your monthly savings add up to your net closing costs. Before that month, you’re still paying back the refinance.

Break-even formula in plain English

Take your total closing costs, subtract any lender credits, and divide the result by your monthly payment savings. The result is the number of months to break even.

If savings are tiny, break-even stretches out quickly—even when the rate looks good on paper.

What break-even misses

Term reset: Resetting to a new 30-year term can increase total interest.
Total interest: Break-even doesn’t measure lifetime interest savings.
Credits vs. points: Credits lower upfront cost but raise the rate; points do the opposite.
Future moves: If you sell or refinance again, you may never reach break-even.

Worked examples

Example A: Low fees, strong savings

Loan balance of $280,000 dropping from 6.9% to 6.1% with $2,400 in net costs. Savings are about $150 per month. Break-even is roughly 16 months.

Example B: Lender credits offset costs

Loan balance of $350,000 dropping from 7.1% to 6.6% with $4,200 in costs and $2,000 in credits. Net costs are $2,200 and monthly savings are about $120. Break-even is roughly 18 months.

Example C: Paying points upfront

Loan balance of $400,000 dropping from 6.9% to 6.2% with $5,500 in costs including points. Savings are about $180 per month, so break-even is around 31 months. This only works if you stay long enough.

A decision rule you can actually use

If you won’t keep the loan well past break-even, it’s usually not worth refinancing. If you will, compare total interest and payment goals to decide if it helps.

Short break-even: More flexibility and lower risk.
Long break-even: Only works with a long time horizon.

Common mistake: Using gross closing costs instead of net costs after credits makes break-even look worse than it is.

Frequently asked questions

What is a good break-even target?

Aim for a break-even month that’s comfortably before your expected move or refinance timeline.

Are lender credits included in break-even?

Yes. Use net closing costs after credits to get an accurate break-even.

Does break-even consider total interest?

Not directly. It only measures recovery of upfront costs, so review lifetime interest too.

What if I refinance again later?

If you refinance before break-even, you may not recover today’s costs.

Is break-even the only thing that matters?

It’s important, but not the only factor. Term changes and goals like payment stability matter too.

Ready to run your numbers?

The calculator will show break-even alongside payment changes so you can compare options quickly.