A refinance has upfront costs. If the new loan lowers your monthly payment, each month of savings pays back part of those costs. The break even point is the month when the savings add up to what you spent.
Why it matters
If you expect to sell or refinance again before that month, the new loan may cost you more than it saves. It is one of the simplest ways to judge whether a refinance makes sense for you.
Where you meet it
Any honest refinance conversation should include it. Our guide on when refinancing makes sense walks through how to think about it.
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