The break-even rule of thumb: if you'll be in the home longer than your break-even point, the refi makes financial sense. Get the break-even number, compare it honestly to your real plans.
For PMI-removal scenarios use the PMI-specific calculator. For 30-to-15 scenarios use the term-shortening calculator. This one is a vanilla rate-and-term refi.
The 3 rules of thumb
- Break-even under 36 months + staying 5+ years = green light.
- Break-even 36-60 months + uncertain timeline = run the math twice — once for "we stay through it," once for "we sell at X." If the second scenario is a net loss, the refi is a bet, not a save.
- Break-even over 60 months = almost never worth it.
The trap term-resets create: if your new loan resets to 30 years but you had 22 left on the original, you're paying interest for 8 extra years even at the lower rate. Look at total lifetime interest, not just monthly savings, when the new term doesn't match your remaining current term.
The honest verdict logic
- ✅ Refinance: break-even under 36 months AND stay ≥ 5 years AND lifetime interest doesn't get worse from a term reset.
- ⚠️ Depends: break-even 36-60 months. Depends on real timeline.
- ❌ Skip: break-even over 60 months, OR stay duration is too short to recoup.
FAQ
What is the break-even point on a refinance?
Break-even = closing costs ÷ monthly savings. The month at which accumulated savings equal what you paid in closing. If you stay past break-even, the refi made money. If you sell or refi again before break-even, the refi lost money.
What's a typical good break-even point?
Under 36 months is strong (assuming you'll stay 5+ years). 36-60 months is workable but depends on your real timeline. Over 60 months almost never makes sense.
Does rolling closing costs into the loan change the break-even?
Yes — and worse. Rolling costs in means you pay interest on those costs for 30 years. The monthly payment is slightly higher and the lifetime interest delta gets worse. Pay closing out of pocket if you can.
What about no-cost refinances?
Closing costs are baked into a slightly higher rate. Break-even is faster (closing costs ≈ 0), but lifetime interest is higher. Worth it if you might sell or refi again within a few years; bad deal if you're staying long-term.
Should I refinance to a different loan type?
Yes if it suits your situation: FHA to conventional to escape MIP, 30 to 15 to slash interest, PMI removal specifically. This calculator is for vanilla rate-and-term.
How long after origination should I wait?
Lenders typically want at least 6 months of payment history before a refi. Cash-out refis often require 12 months of seasoning. Otherwise no minimum — refi the day after closing if rates dropped that fast (very rare).