MortgageMath US

Mortgage glossary

Break-even point

The month a refinance has paid back what it cost.

By the Editorial team Last reviewed 1 min read

Quick answer

The break-even point of a refinance is the number of months it takes for the monthly savings to add up to the closing costs: closing costs ÷ monthly savings. If you sell or refinance again before that month, the refinance has cost you more than it saved.

Key facts

3%

Typical refinance costs, low end (used in the example)

Freddie Mac My Home · Oct 28, 2026

7.24%

30-year fixed average (new rate in the example)

Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026

Example

You owe $300,000 with 28 years left at an example rate of 8.24%. Refinancing into a 30-year loan at 7.24% lowers principal and interest by $245 a month. Closing costs at 3% come to $9,000, paid in cash. Break-even: $9,000 ÷ $245 = 37 months. Keep the new loan longer than that and the refinance comes out ahead.

Where the simple formula falls short

  • Term reset. Restarting at 30 years lowers the payment partly by stretching the debt, so compare balances too, not just payments.
  • Rolled-in costs. Financing the costs means you pay interest on them, which pushes break-even later.
  • Points. The same test tells you whether buying discount points pays.

VA writes the idea into law: an IRRRL must recoup its costs within 36 months. The refinance break-even calculator runs the fuller comparison, and the break-even guide explains the method.

Sources

  1. Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
  2. Freddie Mac My Home — Typical refinance closing costs, low end (share of loan principal) (Oct 28, 2026)
  3. 38 U.S.C. 3709 — VA IRRRL: fees and closing costs must be recouped within (Oct 28, 2026)
  4. CFPB: Should I refinance? (handout)

Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.

RefinancingRefinance break-even point: simple and fullClosing costs ÷ monthly saving, and the fuller test that catches longer terms and rolled-in costs.5 min readGuideIs refinancing worth it? Start with what you want it to doFour reasons to refinance and four different tests — rate, mortgage insurance, term and cash out — each worked out at today’s rates.9 min readGlossaryRefinancePaying off your mortgage with a new loan to change the rate, term or loan type, or to take cash out.1 min readGlossaryRate-and-term refinanceA refinance that changes the rate or term without taking out equity; Fannie Mae calls it limited cash-out.1 min readGlossaryCash-out refinanceA new, larger first mortgage that pays off the old one and hands you the difference in cash.1 min readGlossaryStreamline refinanceA low-paperwork refinance from one FHA, VA or USDA loan into another of the same kind.1 min readGlossaryIRRRL (VA streamline)The VA streamline refinance: a lower-rate VA loan replacing your current one, with rules set by law.1 min readGlossaryHome equityYour home’s market value minus all loans secured by it — the stake you can sell or borrow against.1 min readGlossaryHome equity loanA lump-sum second mortgage, usually at a fixed rate, repaid in equal monthly payments.1 min readGlossaryHELOCA revolving credit line secured by your home, usually priced at the prime rate plus a margin.1 min read

On this page

  1. Quick answer
  2. Key facts
  3. Example
  4. Where the simple formula falls short
  5. Related terms
  6. Sources

↑↓ to move · Enter to open