Monthly savings
Compare the current principal-and-interest payment with the proposed payment after accounting for the new loan amount and term.
Refinance break-even
A lower rate is only valuable if the economics work.
Break-even analysis estimates how long it takes for monthly payment savings to recover the cost of refinancing.
Closing costs
Include the costs required to complete the refinance, whether they are paid in cash, financed, or offset by credits.
Simple break-even
A basic calculation divides refinance costs by monthly payment savings to estimate the crossover month.
Financed costs
When costs are added to the new principal balance, the payment may still decrease while the loan balance increases.
Remaining balance
A stronger comparison looks beyond payment and considers how much principal remains at different future points.
Time horizon
The expected time you will keep the property or loan is critical. A break-even after five years is not useful if you expect to move in two.
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