Definition
The break-even point is the moment when the money you've saved from a lower interest rate equals the upfront cost of getting that rate. This helps you determine if a particular financial decision, like buying mortgage points, is worthwhile.
Understanding Mortgage Break-even
The break-even point often comes up when refinancing or deciding between loan options. It helps you figure out when you'll recover costs like fees and closing expenses. In simple terms, it's the time it takes for your savings to cover the upfront costs. Example: If you save $100 monthly on your mortgage and the closing costs are $2,000, your break-even point is 20 months. It's not about paying off the loan entirely; it's about balancing initial expenses with monthly savings. Understanding this can help you see how long it takes for a mortgage decision to pay off in terms of savings.
