The break-even formula
Your break-even point is how many months it takes for your monthly savings to cover what you paid to refinance. Divide your total closing costs by how much lower your new monthly principal and interest payment is.
Use the lender and third-party fees on your Loan Estimate. Leave out prepaid interest and escrow deposits, since you would pay those either way.
An example
Hypothetical example. APR may differ; example only. Rates change daily. Say you owe $300,000 at 7.5% on a 30-year loan and can refinance to 6.875%. On a 30-year fixed loan, your principal and interest drops by about $127 a month. If the refinance costs $5,000, you break even in about 40 months.
Example details: $300,000 30-year fixed at 7.500% (7.532% APR): 360 monthly payments of $2,097.64; $300,000 30-year fixed at 6.875% (6.903% APR): 360 monthly payments of $1,970.79. Principal and interest only; taxes and insurance not included, so the actual payment will be higher. Unless noted, APR assumes ZERO Closing Costs, no discount points and 15 days of prepaid interest. Hypothetical example prepared November 4, 2026, not a current CapCenter rate offer; subject to credit approval.
Break-even at different fee levels
Hypothetical example. APR may differ; example only. Rates change daily. On $300,000 moving from 7.25% to 6.625%, you save about $126 a month:
Example details: $300,000 30-year fixed at 7.250% (7.280% APR): 360 monthly payments of $2,046.53; $300,000 30-year fixed at 6.625% (6.652% APR): 360 monthly payments of $1,920.93. Principal and interest only; taxes and insurance not included, so the actual payment will be higher. Unless noted, APR assumes ZERO Closing Costs, no discount points and 15 days of prepaid interest. Hypothetical example prepared November 4, 2026, not a current CapCenter rate offer; subject to credit approval.
- $3,000 in fees: about 24 months
- $5,000 in fees: about 40 months
- $7,000 in fees: about 56 months
- No lender closing costs: nothing to recoup
Why the monthly payment alone can mislead
A lower payment can come from a lower rate, a longer term or both. If you have 24 years left and restart a 30-year term, your payment drops even if the rate barely moves, but you may pay more total interest.
For a fair comparison, look at total interest over the years you expect to keep the loan, or compare payments on the same remaining term.
Points and break-even
Discount points lower your rate for an upfront cost. Treat them like closing costs: divide the cost of the points by the extra monthly savings they buy. If you might move or refinance before that point, skipping the points may be better.
How ZERO Closing Costs changes the math
CapCenter refinances come with ZERO Closing Costs (restrictions apply). When lender and third-party fees are paid or waived, there is nothing to earn back, so even a small rate drop can make sense. It also means you can refinance again if rates fall further.
Escrow deposits and prepaid interest still apply, but they aren't fees. Your old escrow balance is usually refunded after the old loan is paid off.
Common mistakes
- Counting prepaid interest and escrow as closing costs
- Ignoring points bought to lower the rate
- Forgetting that fees rolled into the loan add interest
- Comparing a new 30-year loan with 20 years left on your old one
