Calculate your break-even point before deciding

Divide total closing costs by your monthly savings to find how many months it takes to recoup the refinance cost. If closing costs are $4,000 and you save $200/month, the break-even point is 20 months. Only refinance if you plan to stay in the home well beyond that point.

Why It Works

The break-even calculation is the single most important factor. A lower rate means nothing if you sell or move before recouping closing costs. This one number tells you whether refinancing is financially worthwhile.

Tips

• Typical closing costs are 2-5% of the loan amount
• Online refinance calculators from Bankrate or NerdWallet make this easy
• A general rule: refinancing makes sense if you can reduce your rate by at least 0.75-1%