What is the "break-even point?"
When you refinance to a mortgage with a lower interest rate, you'll save money each month by lowering your monthly payment, assuming the other terms of the loan remain the same. However, it costs money to refinance. The closing costs may include appraisal fees, origination fees, insurance, and legal costs. To determine the break-even point, take your total transaction costs and divide by the amount you'll save each month. For example, if your costs total $5,000, and your refinancing will lower your monthly payment by $200, it will take you 25 months before you actually start to pocket the savings. If you think you might sell your house before you reach the break-even point, don't refinance.