GUIDE
When a refinance breaks even
Two different questions get called the break-even. One is the rate where the monthly payment matches. The other is how many months of savings it takes to cover closing costs.
The rate where the payment matches
Keep the balance and the years fixed, and the monthly payment is a function of the rate. It matches when the average 30-year rate equals the rate on the loan. That is the break-even the notify field uses. A loan at 7.40% costs the same per month on this balance when the average is 7.40%.
A lower average is a smaller payment, not a different kind of math. 7.40% on October 8, 2026 and 5.98% on February 26, 2026 are two saved Freddie Mac averages, used here so both rates are real prints.
Closing costs, in months
On $400,000 with 25 years left, 7.40% is $2,930 a month and 5.98% is $2,572 a month. The gap is $358 a month.
Divide an example $8,000 of closing costs by that $358 monthly gap and the cost is covered in 23 months. Replace $8,000 with the costs on your own quote.
The same gap, in today's dollars
Discount that monthly gap at 5.98% over the 25 years left and it comes to $55,620. That is the present-value figure the calculator would show for a 7.40% loan compared with a 5.98% average.
These two weeks are an illustration, not a forecast that rates return to 5.98%. Each date has its own page in the archive.
Open this example in the calculator
Questions
- What is the break-even rate?
- On the same balance and term, the payment matches when the average 30-year rate matches the rate you already have. A 7.40% loan breaks even on the monthly payment at 7.40%. The calculator stores that rate as the break-even.
- How do closing costs change the break-even?
- Closing costs are not in the rate comparison. Divide an example $8,000 of closing costs by that $358 monthly gap and the cost is covered in 23 months. Replace $8,000 with the costs on your own quote. The months are the example cost divided by the difference in monthly payments.
- What is the payment gap worth in today's dollars?
- Staying at 7.40% instead of 5.98% on $400,000 with 25 years left is about $55,620 in today's dollars. That present value uses the same discount as the calculator, at the 5.98% comparison rate.
- Where do these two rates come from?
- 7.40% is the Freddie Mac 30-year average saved for October 8, 2026. 5.98% is the average saved for February 26, 2026. Both are published MORTGAGE30US prints. Neither date is filled in from a neighboring week.
An estimate, not financial advice or a loan quote.