Quick answer
Divide your closing costs by the monthly payment saving to get the simple break-even point. Refinancing a $300,000 balance from 8.24% to today’s 7.24% average saves about $245 a month; at $9,000 of costs that pays back in 3 years 1 month. Freddie Mac puts refinance costs at 3%–6% of the loan.
Key facts
7.24%
Today’s 30-year average (default new rate)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
Two ways to measure break-even
Simple break-even is the rule most people use: total closing costs ÷ monthly saving = months until the refinance has paid for itself. It is quick and easy to check against a Loan Estimate.
Full break-even answers a tougher question: at what point are you actually better off? It adds up everything you would pay on each loan — payments to date plus the balance still owed — and includes costs paid in cash. That catches two traps the simple method misses:
- Restarting the clock. If you have 20 years left and refinance into a new 30-year loan, the lower payment partly comes from stretching the debt over ten more years. You pay less each month but owe more for longer.
- Rolling costs into the loan. Financing the closing costs means no cash today, but you pay interest on them and start with a bigger balance.
The chart shows the full measure year by year: below the line you are behind, above it you are ahead.
Worked examples
$300,000 balance at 8.24%, refinancing to 7.24% with $9,000 of costs paid in cash
| Situation | Monthly saving | Simple break-even | Full break-even |
|---|---|---|---|
| 28 years left → new 30-year loan | $245 | 3 years 1 month | 3 years 1 month |
| 20 years left → new 30-year loan | $510 | 1 year 6 months | 3 years 9 months |
| 20 years left → new 20-year loan | $185 | 4 years 1 month | 3 years 1 month |
The current rate is an example one percentage point above today’s average. Costs use the low end of Freddie Mac’s range.
The second row is the classic trap: stretching 20 remaining years into 30 makes the monthly saving look large, but the full comparison takes much longer to turn positive. Matching the new term to the years you have left — the third row — keeps the comparison honest.
What counts as closing costs
Use section D (“Total loan costs”) of your Loan Estimate plus any points, and leave out prepaid items such as interest and the escrow deposit — those you would pay anyway, and your old escrow balance is usually refunded. Freddie Mac’s consumer site puts typical refinance costs at 3% to 6% of the principal. A “no-closing-cost” refinance doesn’t remove them; the lender covers them in exchange for a higher rate, or adds them to the loan.
Streamline refinances have their own tests
FHA and VA streamline refinances skip much of the paperwork but must leave you better off. A VA Interest Rate Reduction Refinance Loan must recoup its fees within 36 months and, fixed to fixed, cut the rate by at least 0.5%. An FHA Streamline needs at least 210 days since closing and 6 payments, and a net tangible benefit.
When the numbers say wait
If the full break-even comes after the year you expect to move or refinance again, the refinance loses money even if the monthly payment drops. The same is true if most of the saving comes from a longer term that you would not otherwise choose. See when not to refinance.
Frequently asked questions
How do I calculate my refinance break-even point?
Divide total closing costs by the monthly saving in principal and interest. With $9,000 of costs and a $245 saving, that is 3 years 1 month. The calculator also shows a full break-even that accounts for the balance left on each loan.
How much does it cost to refinance?
Freddie Mac’s consumer site puts it at 3% to 6% of the loan principal. Your Loan Estimate lists the exact charges; compare offers from several lenders.
Is it worth refinancing for 1% lower?
It depends on your costs, balance and how long you will keep the loan. On a $300,000 balance, one point lower saves about $245 a month on a new 30-year loan; whether that is worth it comes down to the break-even month versus your plans.
Should I roll closing costs into the new loan?
It saves cash today but adds to the balance you pay interest on, which pushes the full break-even later. Tick the box in the calculator to compare.
Does refinancing restart my loan?
Yes — a refinance is a new loan with a new term. Choosing a term close to the years you have left avoids stretching the debt.
Can I cancel a refinance after signing?
For a refinance of your principal residence with a new lender, yes: you have 3 business days to cancel under the federal right of rescission.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- Freddie Mac My Home — Typical refinance closing costs, low end (share of loan principal); Typical refinance closing costs, high end (share of loan principal) (Oct 28, 2026)
- CFPB — Right to cancel a refinance or home equity loan on your principal home (Aug 8, 2024)
- 38 U.S.C. 3709 — VA IRRRL: fees and closing costs must be recouped within; VA IRRRL fixed-to-fixed: new rate at least this much lower (Oct 28, 2026)
- FDIC Affordable Mortgage Lending Guide (summary of HUD Handbook 4000.1) — FHA Streamline: days that must pass since the current loan closed; FHA Streamline: monthly payments already made (Oct 28, 2026)
- Fannie Mae Eligibility Matrix — Fannie Mae cash-out refinance maximum LTV, one-unit principal residence (Apr 1, 2026)
- CFPB: Is there such a thing as a no-cost loan or refinancing?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.