Entry № 20 · logged Oct 8, 2026Free, no sign-upMoney · Home
When does refinancing pay off?
The rate is the headline; the break-even month is the answer. Post your current mortgage and the refinance offer, and this docket divides your closing costs by your monthly savings — the month the refinance starts paying you back — and stamps the verdict on whether the new loan earns its keep.
Prefilled at $300,000 at 7.5% with 25 years left, refinanced to 6.5%: saves $191 a month, breaks even in 31 months, and nets $51,406 after $6,000 in closing costs.
The refinance docket, Form RF-20. Left: your current loan, posted as-is. Middle: the refinance offer. The seal stamps the only number that matters — how many months until the savings repay what the new loan costs to open.
- Current paymentwhat you pay now$2,217
- New paymentsame term, lower rate$2,026
- Monthly savingsposted every month you stay$191
- Interest left on current loan$365,092
- Interest on the new loan$307,686
- Minus closing costs−$6,000
- Net saved by refinancing$51,406
| Rate drop | New rate | Monthly savings | Break-even | 10-yr net savings |
|---|
Estimates, not advice. Principal and interest only — taxes, insurance, and PMI are separate lines on your statement. Talk to a lender before you sign anything; the docket is a worksheet, not an offer.
Common questions Form RF-20
How do you calculate the break-even point on a mortgage refinance?
Divide the closing costs by the monthly savings. Worked example: $6,000 in closing costs on a $300,000 refinance that saves $191 a month breaks even in 31 months ($6,000 ÷ $191 = 31.4). Stay in the home past that month and the refinance wins; move sooner and it was a net loss.
Is it worth refinancing for a 1% lower rate?
Often, if you stay. Dropping a $300,000 loan from 7.5% to 6.5% with 25 years left saves $191 a month and $57,406 in total interest — $51,406 after $6,000 in closing costs. The break-even is 31 months: worth it if you stay past it, not if you move next year.
What do refinance closing costs usually run?
Freddie Mac estimates 3% to 6% of the loan balance; NerdWallet puts the average refinance near $5,000. Get your lender’s actual quote — the closing cost is the number that decides the break-even.
Does refinancing restart your mortgage term?
Only if you let it. Restarting a 30-year loan at 6.5% on $300,000 after five years paid adds $74,947 in interest versus keeping the remaining 25-year term. Choose “keep my remaining term” unless you have a reason to stretch.
When should you NOT refinance?
If you will move or sell before the break-even month, or if the rate drop is so small the monthly savings never clear the closing costs. A lower payment bought by stretching the term is the third red flag — check the total interest line.