From the RatesQ team · Sample question

What's the break-even point on a refinance?

This educational scenario and its sample explanations are not posts from real users.

My lender says I'd save $180/month by refinancing but closing costs are $6,500. When would this be worth it?

Quick Summary

  1. Compare the break-even month with how long you expect to keep the loan.
  2. A payment-only calculation does not capture every interest, insurance or balance difference.
  3. Use a consistent cost basis and holding period for the loans being compared.

Sample explanations

From the RatesQ team

$6,500 ÷ $180/month = 36.1 months — you'd break even in exactly 3 years. If you stay in the home and don't refinance again for more than 3 years, you come out ahead. After 5 years you'd be $4,300 net positive. After 10 years, $15,100 net positive (before accounting for time value of money). If you might sell or refi within 3 years, it's a coin flip.

From the RatesQ team

One more thing — if you're rolling the $6,500 into the loan rather than paying out of pocket, the real monthly savings are less than $180 because you're now borrowing more. Get the lender to show you the actual net savings after the higher principal is factored in.