What is the break-even on a conventional refinance?
Total closing costs divided by the monthly payment savings = number of months to break even. If you'll keep the loan past that point, the refinance pays off. If you'll sell or refinance again sooner, it doesn't. A 0.5% rate drop on a $400k loan typically saves $100-150/month — break-even on $5k closing costs is 33-50 months.
What this actually means.
Break-even math: closing costs / (old monthly P&I + old PMI - new monthly P&I - new PMI). Add tax/insurance changes if those move materially. Hold past break-even = positive ROI. Common rule of thumb: a 1% rate drop is usually worth refinancing if the borrower will hold 3+ years; smaller drops need longer holds. Lender credits (raised rate + cash credit) can lower break-even at the cost of long-term savings. Subject to lender pricing.
Where this can move.
Rate environment, equity, credit, current loan type, seasoning, AUS findings (appraisal waiver eligibility), and program rules can change the answer.
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More conventional questions on Refinance.
Educational only. Conventional loan guidelines, lender overlays, rates, fees, PMI, LLPAs, and underwriting requirements can change. Final eligibility depends on full underwriting review. Mortgage Expert, Inc. is not affiliated with Fannie Mae, Freddie Mac, FHFA, or any government agency.