How much does it cost to refinance?

The median refinance in 2023 had $7,329 in loan costs (lender charges, points and third-party fees such as the appraisal and title), according to the CFPB's analysis of federal mortgage data. Recording fees, transfer taxes, prepaid interest and a new escrow deposit come on top, though the escrow balance on your old loan is usually refunded.

Is a 1% lower rate worth refinancing?

It depends on the balance. With $7,329 of costs, cutting a $300,000 loan from 7.50% to 6.50% saves $266 a month and breaks even in 28 months. The same cut on a $100,000 balance saves only $89 a month and takes 83 months to recover the costs.

Should I roll closing costs into the new loan?

It avoids paying cash at closing but costs more over time. In the $300,000 example at 6.50%, rolling $7,329 into a new 30-year loan cuts the monthly saving from $266 to $220, moves the true break-even from 30 months to 36 months, and changes the lifetime result from a $10,591 saving to a $1,243 saving.

Is refinancing worth it? How to find your break-even

By John Crane, MBA & the Editorial Team · Updated October 15, 2026 · How we check our numbers

Refinancing is worth it when the money you save each month repays the closing costs before you sell or refinance again. Divide the costs by the monthly saving to get the break-even month. A $300,000 balance at 7.50% with 27 years left, refinanced into a 30-year loan at 6.50% with the $7,329 median closing costs, saves $266 a month and breaks even in about 28 months.

Over the whole loan, that refinance comes to a $10,591 saving after costs, less than the rate cut suggests because it adds three years of payments. Keeping the original payoff date instead comes to a $56,025 saving.

The break-even formula

The simple version, the one you will see most often, is:

Break-even month = closing costs / monthly payment saving

The CFPB suggests asking lenders to compare total costs over a few different timeframes, which is the same question: how long until the saving covers the cost.

Take a loan that started as a 30-year mortgage at 7.50% three years ago, with $300,000 still owed and a principal and interest payment of $2,162. Refinancing that balance into a new 30-year loan at 6.50% drops the payment to $1,896, a saving of $266 a month. The example uses 6.50%, one point below the old rate, because today's average of 7.24% is too close to 7.50% to show a saving. With $7,329 in closing costs, the median total loan costs for refinances in the CFPB's latest data (2023, including any discount points), the costs are repaid after $7,329 / $266 = 28 months.

If you expect to keep the loan well past that month, the refinance probably pays. If you might sell or refinance again before then, it probably does not.

Why the simple version can mislead

A new 30-year loan resets the clock

The payment falls partly because of the lower rate and partly because the $300,000 is now spread over 30 years instead of 27. A lower payment is not the same as paying less. Our calculator also reports a true break-even: the first month you are ahead counting the cash paid, the payments made and the balance still owed. In this example it is 30 months.

The gap is larger on a small rate cut. Refinancing into 7.00% saves $166 a month and appears to break even in 45 months, but over the full 30 years it comes to a $25,302 loss after costs compared with keeping the old loan, because the extra three years of payments outweigh the rate cut.

Interest, not the payment, is the real saving

Keeping the 27-year payoff date at 6.50% gives a smaller payment cut, $196 a month, so the simple formula says 38 months. Yet more of each payment goes to principal, and the true break-even is 30 months. Total interest falls by $63,354, while on the 30-year reset it falls by $17,920.

Taxes and other costs

Mortgage interest is deductible only if you itemize, so a lower rate also means a smaller deduction for itemizers. Points paid to refinance are generally deducted a little each year over the life of the loan rather than all at once (IRS Publication 936). The CFPB's loan cost median also leaves out recording fees, prepaid interest and escrow deposits, so the cash you bring to closing is usually higher.

How much the rate drop matters

The same $300,000 balance at 7.50% with $7,329 of costs paid in cash, for three possible new rates. The first table resets to 30 years; the second keeps the 27-year payoff date.

New 30-year rate	Monthly saving	Simple break-even	True break-even	Interest saved
7.00% (0.5 points lower)	$166	45 months	66 months	-$17,973
6.50% (1 point lower)	$266	28 months	30 months	$17,920
6.00% (1.5 points lower)	$364	21 months	20 months	$53,039

Principal and interest only. Interest saved compares total interest left on the old loan with total interest on the new one; a negative figure means more interest. Subtract the closing costs for the net saving.

New 27-year rate	Monthly saving	Simple break-even	True break-even	Interest saved
7.00%	$99	75 months	59 months	$31,997
6.50%	$196	38 months	30 months	$63,354
6.00%	$290	26 months	20 months	$94,040

Enter your own balance, rate and lender quotes to see both break-even months and the lifetime cost.

Open the calculator

New 30-year, same payoff date, or 15-year

The term you choose changes the answer as much as the rate. Here is the same $300,000 balance and $7,329 of costs three ways:

New loan	Monthly payment	Change	True break-even	Net saving
30 years at 6.50%	$1,896	$266 less	30 months	$10,591
27 years at 6.50%	$1,967	$196 less	30 months	$56,025
15 years at 6.60%	$2,630	$468 more	27 months	$219,853

15-year rate is today's Freddie Mac average of 6.60%. Net saving is total remaining payments on the old loan minus total payments on the new one and the closing costs.

A 15-year loan raises the payment but saves the most over time, $219,853 after costs here, because the balance is gone 12 years sooner. A 30-year loan keeps the most cash free each month. Another middle path is to take the 30-year loan and keep paying the old amount, which pays it off early; the refinance calculator shows that option too.

Cash-out refinancing

A cash-out refinance replaces your loan with a bigger one and hands you the difference. Taking $50,000 out of the example at 6.50% for 30 years makes the payment $2,212, $316 a month more than refinancing the balance alone, and the $50,000 costs about $63,772 in interest if you take the full 30 years to repay it.

Cash-out borrowers pay discount points more often: in the first nine months of 2023, 88.5% of cash-out refinance borrowers paid discount points, against 56.2% of other refinance borrowers, the CFPB found. Fannie Mae generally limits a cash-out loan on a one-unit primary home to 80% of its value and requires the loan being paid off to be at least 12 months old. Because the cash is borrowed, break-even arithmetic does not apply to it; compare its cost with other ways to borrow the same amount.

The one-point rule versus your own break-even

A long-standing rule of thumb says to refinance when rates fall by at least a point. The rule ignores your balance and your costs. With $7,329 of costs, a 6.00% rate on the $300,000 loan breaks even in 21 months, while a one-point drop on a $100,000 balance takes 83 months, close to 7 years.

Two questions settle it better than any rule: how many months until the saving repays the costs, and how long you expect to keep this loan. A break-even of 28 months is attractive if you plan to stay 10 years and a loss if you move sooner than that. A no-closing-cost offer does not escape the trade-off; the CFPB notes that lenders cover those costs with a higher rate or by adding them to the balance. For buying instead of refinancing, the mortgage calculator and the PMI guide cover the other side of the loan.