Refinance
How to calculate your refinance break-even
By Isaiah Wilburn · Jul 14, 2026 · 6 min read
Every refinance decision comes down to one honest number: the break-even month. It is the month when the money you save each month has finally repaid what the refinance cost you. Before that month, you are behind. After it, you are ahead. Everything else is noise.
The formula, in plain terms
Take your total closing costs and divide them by the amount you save each month. That gives you the number of months it takes to break even. If you will keep the loan well past that month, refinancing pays. If you might sell or refinance again before it, it usually does not.
There is no 1 percent rule
The old idea that your rate has to drop a full point is a myth. A 0.5 percent drop can be worth it on a large balance with low costs. A 1.5 percent drop can be a bad deal if you are moving next year. The break-even is what tells the truth, not a rule of thumb.
A worked example
Say you owe 500,000 dollars at 7.0 percent and today's realistic rate for your profile is 6.0 percent. The lower rate saves you roughly 330 dollars a month, and the refinance costs about 8,000 dollars. Here is the shape of that decision.
Illustrative only. On a 500,000 dollar balance, roughly 330 dollars a month repays about 8,000 dollars in costs near month 24. Your real numbers will differ, and we run them before you apply.
Break-even lands around month 24. If you will be in the home past two years, this refinance pays for itself and then saves you every month after. If you might move inside two years, it probably does not, and we would tell you to wait.
What people get wrong
- Chasing the rate instead of the break-even. A headline rate with high costs can lose to a slightly higher rate with low costs.
- Ignoring how long they will stay. The break-even only pays off if you keep the loan past it.
- Rolling costs into the balance and forgetting they still count. Financed costs are still costs.
- Restarting a 30-year clock without noticing. A lower payment can still mean more total interest.
Rates move every day. Your break-even does not care about the headline. It only cares about your loan and how long you will keep it.
Team Wilburn's Refis
How we run it for you
We calculate the break-even against your actual loan, not a national average, using a soft credit pull that never touches your score. If it does not clear inside your timeline, we say so. No application, no hard pull, no pressure.
Common questions
How much does my rate need to drop for a refinance to be worth it?+
There is no universal number. What matters is whether the monthly savings repay your closing costs before you would sell or refinance again. We calculate the break-even on your actual loan so you decide on real math, not a rule of thumb.
Do closing costs I roll into the loan still count?+
Yes. Financing the costs spreads them out, but they are still money you paid to refinance, so they still belong in the break-even math. We include them either way.
Does checking my break-even hurt my credit?+
No. Running your break-even uses a soft credit inquiry with zero impact on your score. A hard pull only happens if you formally apply, after you have decided the numbers work.
This is part of our Refinance guide.
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