When could refinancing pay for itself?

Refinancing can make financial sense when the interest savings or other benefits exceed the mortgage penalty, legal, appraisal and setup costs. The break-even point shows how long it takes for the monthly savings to recover those upfront costs.

Divide the total refinancing costs by the estimated monthly savings from the new mortgage. A more complete calculator also accounts for changes in amortization and the fact that lowering a payment by stretching the amortization does not necessarily create true interest savings.

There is no universal rate difference. A small reduction can be worthwhile on a large balance with years remaining, while a larger reduction may still not justify refinancing if the penalty and fees are high.

Yes. Any prepayment charge to break the existing mortgage should be included because it is often the largest refinancing cost. Legal, appraisal, discharge and registration costs should also be included where applicable.

It can improve monthly cash flow, but a lower payment is not automatically a financial saving. Extending the amortization can increase the total interest paid, so both monthly cash flow and lifetime borrowing cost should be compared.