When refinancing your mortgage pays off

Updated November 8, 2026

Refinancing replaces your mortgage with a new one, usually to get a lower rate, a lower payment or a different term. It costs money up front, so the real question is how long it takes to earn that back.

The break-even point

Break-even months = closing costs ÷ monthly savings

If a refinance costs $6,000 and cuts your payment by $200 a month, you break even in 30 months. If you'll keep the home and the loan longer than that, the refinance is likely worth it. If you might sell or refinance again sooner, it probably isn't.

Our refinance calculator works this out, including what you'd pay over the life of each loan.

Watch the term

A lower payment isn't always a saving. Refinancing a loan with 22 years left into a new 30-year loan lowers the payment partly by adding 8 years of payments. Compare total interest left on your current loan with total interest on the new one. Or pick a shorter term, or keep paying your old amount.

Good reasons to refinance

• Rates have dropped enough that the break-even point is well within the time you'll stay.
• You want to drop mortgage insurance now that you have 20% or more equity. For FHA loans, refinancing into a conventional loan is often the only way.
• You want to move from an adjustable rate to a fixed one before it resets.
• You want to pay off high-interest debt with a cash-out refinance. Weigh the risks first.

Before you apply

• Get Loan Estimates from at least three lenders on the same day, and compare the rates and the fees in Section A.
• Points lower your rate for a fee up front. They only pay if you keep the loan past their own break-even point.
• Your credit score, home value and debt-to-income ratio all affect the rate you're offered.