Mortgage Strategy
Is a 0.5% Lower Mortgage Rate Worth Refinancing?
Sometimes yes, sometimes no. A 0.5% rate drop can be valuable, but the right answer depends on refinance fees, your remaining balance, and how long you plan to keep the loan.
Start with break-even math
Break-even months = total refinance fees / monthly payment savings. If your fees are $4,500 and your payment drops by $180, break-even is about 25 months.
When a 0.5% drop is usually worth it
- You expect to keep the loan longer than break-even.
- Fees are modest and no heavy points are required.
- You are not extending to a much longer loan term.
Rule of thumb: a full-point drop is often attractive, but plenty of good refinances happen below one point when fees are low and timeline is long enough.
When it might not be worth it
- You may move or refinance again before break-even.
- Closing costs are high relative to savings.
- The new term resets you back to 30 years and increases long-run interest.
Run the Refinance Break-Even Tool