When does refinancing make sense?
A refinance usually makes sense when your monthly savings pay back the closing costs well before you expect to sell or refinance again. Divide the total cost by the monthly savings to get the break-even point in months.
The break-even math
- Break-even months = total refinance costs divided by monthly principal and interest savings.
- Example only: $6,000 in costs and $200 a month in savings means about 30 months to break even.
- Use our refinance calculator with your own numbers and real Loan Estimates.
What else to weigh
- Starting a new 30 year loan restarts the clock. Lower payments can still mean more total interest over time.
- Points paid to lower the rate add to your costs and push the break-even point out.
- If you plan to move soon, a refinance may never pay for itself.
Questions people ask
- Is there a rule of thumb for how much the rate should drop?
- No single rule fits everyone. The break-even point and how long you will keep the loan matter more than any fixed rate drop.
- Does refinancing hurt my credit?
- Applying adds a credit inquiry, and a new loan changes your account history. Shopping several lenders within a short window is usually treated as one search.
- Should I roll closing costs into the loan?
- It lowers cash at closing but raises your balance and the interest you pay. Compare both options on the Loan Estimate.
Official sources
- CFPB, Lender credits and discount points ↗
- CFPB, Understand the different kinds of loans ↗
- CFPB, Regulation Z section 1026.23, right of rescission ↗
Facts checked 2026-11-01. General information, not financial, legal or tax advice. We are not a lender.