Refinance Closing Costs and
Break-Even Analysis Formula
Closing Costs from Good Faith Estimate to Include for Break-Even Analysis

Subtract any estimation for property tax escrow deposits, homeowner's insurance (and homeowner's association dues if applicable) escrow deposits, and pre-paid interest estimations.

You are now left with the true "Bottom Line" closing costs total by adding the remaining expense items from the good faith estimate.

Refinance Closing Costs Break-Even Formula:

"Bottom Line Closing Costs Divided By Monthly Savings = Break-Even Point"

Say for instance that your total Bottom Line closing costs amount to $6,600 and by refinancing into your new loan, your monthly mortgage payment will decrease by $275. Divide the $6,600 by $275 and your resulting Break-Even Point is 24 months.

So, in 24 months, the closing costs will be paid for and the borrower will receive a net benefit of $275 per month thereafter. Yes, it's that simple!