Should You Refinance Your Mortgage? How to Calculate Break-Even
By Calqpro Editorial Team · April 20, 2026 · 6 min read
Refinancing can save tens of thousands of dollars — or cost you money if you move too soon. The key number is the break-even point: how many months until your monthly savings exceed the closing costs you paid upfront.
The Break-Even Formula
Example: You refinance and pay $6,000 in closing costs. Your new payment is $180/month lower. Break-even = $6,000 ÷ $180 = 33 months (2.75 years). If you stay longer, you come out ahead.
When Refinancing Makes Sense
- Your new rate is at least 0.75–1% lower than your current rate
- You plan to stay in the home past the break-even point
- You're switching from an ARM to a fixed rate for stability
- You want to shorten your loan term (e.g., 30-year to 15-year)
- You want to eliminate PMI and have enough equity
When Refinancing Doesn't Make Sense
- You plan to sell or move within 2–3 years
- You're far into your loan — most interest is already paid in the early years
- The rate drop is less than 0.5% — savings may not cover fees
- Your credit score has dropped significantly since your original loan
- You'd be extending your loan term and resetting the amortization clock
Real Example: 30-Year to 15-Year Refinance
$300,000 remaining balance, current rate 7%, 20 years left:
| Option | Monthly Payment | Total Interest |
|---|---|---|
| Keep current (20 yrs left at 7%) | $2,326 | $258,000 |
| Refi to 15-yr at 6.25% | $2,572 | $162,000 |
You pay $246 more per month but save $96,000 in interest and pay off 5 years earlier. After $6,000 closing costs, break-even is about 24 months.
Watch Out for "No-Cost" Refinancing
No-cost refinancing doesn't eliminate closing costs — it rolls them into the loan balance or covers them via a slightly higher rate. You pay eventually, just not upfront. It makes sense if you're uncertain how long you'll stay, but understand you're still paying those costs.
Calculate your refinance break-even point
Use the Refinance Calculator →