At the same exit month, cash recovery equals current payments minus proposed payments minus cash closing costs. Economic benefit also adds current remaining debt minus proposed remaining debt. Positive values favor the proposal. Optional discounting applies the entered effective annual rate to the same cash and debt streams.
The Break-Even Decision
The first cost recovery may later reverse. Sustained recovery is evaluated through both modeled loans; equality at month zero alone is not a benefit. Each payment stops at actual payoff and the last payment is limited to the remaining amount owed. Compare the selected exit value as well as the crossing month.
Beyond the Monthly Payment
A lower payment can result from borrowing for longer and does not by itself establish lower cost. Compare both loans at the same exit month, including remaining debt. Matching the current remaining term or keeping the current payment are separate scenarios; keeping it adds principal only when the new required payment is lower.
No-Cost Refinancing Explained
A lender credit offsets specified closing costs in a quoted transaction; financing fees adds them to debt. These are different arrangements. Neither an initial zero cash outflow nor a lower payment proves an immediate economic gain. Compare the actual rate, fees, repayment term and remaining debt.
The 1% Rule — A Starting Point, Not a Conclusion
There is no universal rate-drop or break-even cutoff that makes a refinance suitable. Use current written quotes, actual costs and several exit dates. These arithmetic scenarios do not establish eligibility, tax benefits, future interest rates or a recommendation to refinance.