Refinance Break-Even Teaser
Refinance Break-Even: Would Refinancing Actually Save You Money?
A refinance pitch always leads with the lower payment. The lower payment is never the question. The question is how many months of that saving it takes to earn back what you hand over at closing — and whether you are still in the house by then.
What you’ll need: Your current balance and rate (both on your last mortgage statement), roughly how many years are left, and the rate you’re being offered.
What you’ll get: The new payment over the same years you have left, the monthly saving, the break-even month, and the interest that changes hands between now and the same payoff date.
Same payoff date — $300,000 over the 26 years you have left
New payment
$1,976
vs $2,139 today
Monthly savings
$163
every month to payoff
Break-even
37 months
$6,000 closing ÷ $163/mo — about 3 yr 1 mo
Interest saved
$50,945
$44,945 after closing costs
The test that matters
You get the $6,000 back in 37 months (3 yr 1 mo). Leave, sell, or refinance again before then and this cost you money. Stay past it and every month after is real. A 0.85-point drop clears the old 0.75-point rule of thumb. That rule is a shortcut, not the answer: what decides it is whether you stay in the house past the break-even month above.
What if you start a fresh 30 years?
Your lender will offer a new 30-year term, and the payment drops further — to $1,877, which is $263/mo below what you pay today. That is not the same kind of saving. It buys the lower payment by putting you back 4 years further from owning the house, and over the life of that loan you pay about $59,083 more interest than the same-term refinance above.
Neither figure is wrong. They answer different questions — “what does this cost me?” and “what can I pay this month?” — so this tool never adds them together, and the headline above is always the like-for-like one.
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What this doesn’t model
Four things move a real refinance decision that are not in the numbers above: points paid to buy the rate down, cash-out that raises the balance you are refinancing, the tax treatment of the interest you stop paying, and any change to PMI when the new appraisal lands. It also assumes you write the closing cheque rather than rolling the costs into the loan. And it says nothing at all about the question underneath — whether staying in this house, at this payment, still beats the alternative.
Q+ models the refinance in full: the exact month you break even, points and cash-out priced in, a break-even chart, and the refinance dropped into your own month-by-month rent vs buy picture instead of standing beside it.
See the full picture in Q+