Break-Even Point (Refinancing)
The point at which savings from a new loan finally outweigh the cost of getting it.
When refinancing, the break-even point is how long it takes for the monthly savings to add up to more than the closing costs paid to refinance. Before that point, you're net behind on the deal; after it, every additional month is pure savings. It only makes sense to refinance if you expect to hold the loan past this point.
Worked Example
If refinancing costs $6,000 upfront and saves $220/month, the break-even point is $6,000 ÷ $220 ≈ 27 months — just over two years.
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