1. What is the Refinance Break-Even Point?

The refinance break-even point is the number of months it takes to recover the closing costs of refinancing through monthly payment savings. This calculator includes the option to account for extra monthly payments you might be making.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

• Closing Costs — Total fees paid to refinance (USD)
• Old Monthly Payment — Original mortgage payment amount (USD)
• Extra Payment — Additional monthly payment you're making (USD)
• New Monthly Payment — Payment amount after refinancing (USD)

Explanation: The equation divides your upfront costs by your monthly savings to determine how many months it will take to break even.

3. Importance of Break-Even Calculation

Details: Calculating the break-even point helps determine if refinancing makes financial sense based on how long you plan to stay in your home.

4. Using the Calculator

Tips: Enter all costs and payment amounts in USD. The extra payment field can be set to zero if you're not making additional payments.

5. Frequently Asked Questions (FAQ)

Q1: What counts as closing costs?
A: Include all fees associated with refinancing: application fees, appraisal fees, title insurance, attorney fees, etc.

Q2: What if my break-even is "Never"?
A: This means your monthly payment isn't decreasing enough (or at all) to offset the closing costs.

Q3: Should I include escrow in payment amounts?
A: No, use only principal and interest payments for accurate comparison.

Q4: How does extra payment affect break-even?
A: Extra payments increase your monthly savings when refinancing to a lower rate, shortening the break-even period.

Q5: What's a good break-even period?
A: Typically, refinancing makes sense if you'll stay in the home longer than the break-even period, usually 2-3 years or less.