Refinancing gets discussed as though the rate is the whole question. It isn’t. The rate determines your monthly saving; the closing costs and how long you stay determine whether that saving ever reaches you.
One division answers it: closing costs ÷ monthly saving = months to break even.
Where rates sit
For the week ending 13 August 2026, Freddie Mac’s survey put the US 30-year fixed at 6.67% and the 15-year at 5.96%. Refinance pricing tracks purchase pricing closely, usually within a small margin.
View the data
| Jun 25 | 6.49% |
|---|---|
| Jul 2 | 6.43% |
| Jul 9 | 6.49% |
| Jul 16 | 6.55% |
| Jul 23 | 6.58% |
| Jul 30 | 6.66% |
| Aug 6 | 6.69% |
| Aug 13 | 6.67% |
Source: Freddie Mac PMMS via FRED (MORTGAGE30US), accessed .
Worth noticing: rates rose through the summer while the Federal Reserve held its policy rate at 3.50–3.75%. Mortgage pricing follows long-term bond yields rather than the Fed directly (the mechanism is here), which is why waiting for a Fed cut is not a refinancing strategy.
The break-even calculation
Three numbers.
Your monthly saving. New payment minus current payment, principal and interest only.
Your total closing costs. Origination, appraisal, title, recording. Ask for the full figure, not the headline fee.
Months to break even. Costs divided by saving.
Worked example: $4,800 of closing costs against a $190 monthly saving breaks even in about 25 months. Stay four years and you’re clearly ahead. Move in eighteen months and you paid $4,800 to save $3,420.
That’s the whole decision, and it’s why two neighbours with identical rate quotes can get opposite answers.
Why the “1% rule” fails
The old advice, only refinance if you can cut a full percentage point, ignores the two variables that matter.
Loan size. On a $600,000 balance, half a point is a large monthly saving that clears typical costs quickly. On a $120,000 balance, a full point may not.
Costs. Two lenders quoting the same rate with different fee structures produce different break-evens.
Run the division. It takes two minutes and it beats any rule of thumb.
The trap: restarting the clock
Refinancing a loan you’re eight years into back to a fresh 30-year term lowers the payment and can raise the total interest you pay, even at a lower rate — because you’ve added eight years of interest back on.
Two ways round it. Refinance into a term matching your remaining years, or take the 30-year and keep paying your old, higher payment. The second gives you a lower required payment as a safety net while clearing the loan on the original schedule.
Judge every refinance on total cost over the time you’ll keep it, not on the new monthly figure.
When refinancing at a higher rate is still right
Three legitimate cases where the rate goes up and the move is correct:
Removing mortgage insurance. If your equity has crossed the threshold, dropping the insurance premium can outweigh a slightly higher rate.
Getting out of an adjustable rate. Trading uncertainty for a fixed payment has value that a rate comparison doesn’t capture.
Cash-out for a genuinely better purpose. Replacing debt at 20.94% with mortgage debt at 6.67% is a large rate saving, and it converts unsecured debt into debt secured against your home. Lower cost, categorically higher stakes. Worth doing deliberately, never casually.
Before you apply
Check your credit first. Refinance pricing is banded by score, and on this size of loan the bands are worth thousands. If you have a few months, improving the score first usually beats shopping harder.
Get several quotes in a short window. Scoring models generally treat multiple mortgage inquiries within a short period as a single event, precisely so shopping isn’t punished.
Compare total cost, not rate. A lower rate bought with higher fees is a longer break-even.
The rule of thumb was always going to mislead someone. Skip it and run the refinance estimator on your actual numbers instead; the mortgage guide is there if a term along the way needs unpacking.