Tools
The Refinance Break-Even Calculator
One division problem decides whether a refinance actually pays.
Refinancing is marketed on the monthly savings. The number that actually matters is the break-even: how long it takes those savings to repay the cost of doing the refinance.
The one calculation
Take your total closing costs and divide by your monthly savings. The result is the number of months to break even. Keep the loan well past that point and the refinance pays. Move or refinance again before it and you lost money, no matter how good the new rate looked.
Watch the term reset. Lowering your rate but restarting a fresh 30-year clock can reduce the monthly payment while raising your lifetime interest. A true break-even view compares total interest, not just the monthly number.
Pro tip
If you will likely move within a few years, a lender credit that covers the costs in exchange for a slightly higher rate can beat paying costs for a lower rate you will not keep long enough to recover. Match the structure to your time horizon.