mortgage
Break-Even Point
The break-even point is the moment at which total revenue or savings equals total costs — beyond which an action becomes profitable. In refinancing, it's when cumulative savings exceed closing costs.
Formula
Break-even = Upfront Cost ÷ Monthly Savings In mortgage refinancing, break-even = closing costs ÷ monthly savings. If closing costs are $4,000 and refinancing saves $200/month, break-even is 20 months. If you plan to stay in the home longer, refinancing makes sense.
Break-even analysis applies to any upfront cost + ongoing savings trade-off: solar panels, home improvements, lease vs. buy, switching bank accounts with a transfer fee.
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Open calculator →Related terms
- Mortgage Payment
- A mortgage payment is the fixed monthly amount owed to a lender, covering principal and interest (P&I). It may also include escrow for property tax and homeowners insurance (PITI).
- Principal
- The principal is the original amount borrowed on a loan, or the outstanding balance still owed — excluding interest. On a mortgage, principal is the portion of each payment that reduces the loan balance.
- Rate of Return
- A rate of return (RoR) is the net gain or loss of an investment over a specified period, expressed as a percentage of the initial investment.
Frequently asked questions
What is Break-Even Point?
The break-even point is the moment at which total revenue or savings equals total costs — beyond which an action becomes profitable. In refinancing, it's when cumulative savings exceed closing costs.
What is the Break-Even Point formula?
The formula is: Break-even = Upfront Cost ÷ Monthly Savings