is there a 'break even' point for refinancing a mortgage?
There sure is!
First thing you do is go find your mortgage statement and find your principal and interest payment. Make a note of it. Then you determine how much your refinance transaction will cost you and add that figure to your principal balance. Now, with that number in hand, go to your nearest online mortgage calculator and figure out what your payment will be. Subtract your new principal and interest payment from the old principal and interest payment to find out your monthly savings. When you divide your monthy savings into the cost of the refinance, the number you get will be the number of months before you break even.
So, if your refinance gets you savings of $100 per month and costs $3600 to accomplish, your break even point is 36 months. Thus, if you plan on keeping the home for about three years or less, the refinance doesn't make much sense in the long run. On the other hand, for someone planning to stay longer than 36 months, the transaction will make much more sense -- $100 more for every month they stay beyond month 36.