How do I evaluate a refinance when I'm paying points? What's the break-even method that's not misleading?

How do I calculate break-even on refinance points?

You want to figure out whether paying points on a refinance makes financial sense and when you'll break even on the upfront cost. Many people calculate break-even by dividing the points cost by monthly payment savings, but that method can be misleading because it ignores opportunity cost and assumes you'll never move or refinance again.

The more accurate approach compares your total cost over time with and without points. Points reduce your interest rate, which lowers monthly payments and total interest paid. Calculate how much you'll pay in total (including the points) over different time periods—say 5, 7, and 10 years. Compare that to your total cost without points over the same periods. The break-even point is when the "with points" total becomes lower.

Check your loan estimate to see the exact points cost and new interest rate. Run the numbers for realistic timeframes based on how long you expect to stay in the home. Consider that you could invest the points money elsewhere and earn returns. Share your timeline and goals with your lender—they can show you total cost comparisons and help you run scenarios for different holding periods.