The Break-Even Formula
The break-even point tells you how long until refinancing saves you money:
Break-even = Closing Costs ÷ Monthly Savings
Example: $4,000 closing costs ÷ $150/month savings = 26.7 months (about 2.2 years)
When Refinancing Makes Sense in 2026
- Rate is 0.75%+ lower than your current rate
- You plan to stay in the home past the break-even point
- You have 20%+ equity (avoids PMI on new loan)
- Your credit score has improved since original loan
- You want to switch from ARM to fixed rate
Refinancing Costs to Expect
- Origination fee: 0.5%–1% of loan amount
- Appraisal: $300–$600
- Title insurance: $500–$1,500
- Recording fees: $25–$250
- Total typical closing costs: 2%–5% of loan amount
Frequently Asked Questions
Is it worth refinancing in 2026?
If your current rate is above 7.5% and you can get under 6.5%, refinancing likely makes sense if you plan to stay in the home for 2+ years. Use the break-even calculation to confirm.
How much does it cost to refinance a mortgage?
Typical refinance closing costs are 2%–5% of the loan amount, or $4,000–$10,000 on a $200,000 loan. Some lenders offer no-closing-cost refis (higher rate).
Can I refinance with bad credit?
FHA streamline refinances require no minimum credit score and no appraisal. Conventional refinances typically require a 620+ score, while the best rates go to 740+ borrowers.
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