Closing costs and break-even

What is in them

The lender's fees for making the loan, any discount points, title insurance and the title search, an appraisal, and the county's recording fees. Until you type your lender's figure, our check assumes a published fixed amount for the fees, plus the points today's estimate is priced at, as a share of your balance.

Our check assumes you pay them in cash at closing. Adding them to the loan instead raises your balance, and you pay interest on them for the life of the loan.

How we count the savings

We count the interest the new loan saves you, month by month, not the drop in your payment. A longer new term lowers the payment partly by spreading your balance over more years, which is not a saving, so counting interest keeps a longer term from flattering the answer. That is why a new loan over the years you have left usually breaks even sooner.

Points move the costs

Paying discount points raises the closing costs and lowers the rate, so break-even comes later and the savings after it are larger. Points pay only if you keep the loan long enough to pass that later break-even.

Break-even is not the whole answer

A loan that breaks even in a few years can still be a poor choice today if rates may fall further: refinancing now gives up the chance to refinance lower later. Your trigger rate counts that chance too.