1. What is the Refinance Break-Even Point?

The refinance break-even point is the number of months it takes for the monthly savings from your refinance to equal the closing costs you paid. This helps determine if refinancing makes financial sense for your situation.

2. How Does the Calculator Work?

The calculator uses the break-even formula:

Where:

• \( \text{Closing Costs} \) — Total fees paid to refinance (USD)
• \( \text{Old PMT} \) — Original monthly mortgage payment (USD)
• \( \text{New PMT} \) — New monthly mortgage payment after refinance (USD)

Explanation: The equation calculates how many months of payment savings are needed to recover your upfront refinancing costs.

3. Importance of Break-Even Calculation

Details: Calculating your break-even point helps determine if refinancing makes sense based on how long you plan to stay in your home. If you'll move before reaching break-even, refinancing may not be worthwhile.

4. Using the Calculator

Tips: Enter all costs accurately including lender fees, appraisal fees, and other closing costs. Use your actual old and new payment amounts including principal, interest, taxes, and insurance if escrowed.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good break-even point?
A: Typically, a break-even under 24 months is considered good, but this depends on your plans. The shorter the better.

Q2: Should I include all closing costs?
A: Yes, include all fees: lender fees, appraisal, title insurance, escrow, and prepaids you're responsible for.

Q3: What if my payment increases?
A: This calculator assumes payment decreases. If increasing payments (like cash-out refinance), different analysis is needed.

Q4: Does this account for interest savings?
A: Indirectly - your payment reduction reflects interest savings from a lower rate or longer term.

Q5: Should I consider other factors?
A: Yes, also consider loan term changes, equity position, and your long-term housing plans.