Mortgage Strategy

Refinance Break-Even: When a Lower Rate Actually Pays Off

Published February 27, 2026 • 8 min read

When rates move lower, refinance offers show up quickly. The real question is not just "Is the rate lower?" It is "How long until the savings recover the refinance cost?"

As of February 26, 2026, Freddie Mac's weekly survey reported a 5.98% average for a 30-year fixed mortgage, the first sub-6% reading in roughly 3.5 years (since September 2022). That is why many homeowners are revisiting refinance math right now.

Break-even formula (the number that matters most)

Break-even months = total refinance fees / monthly payment savings

If your payment drops by $500/month and fees are $5,000, break-even is 10 months.
If savings are $250/month with the same $5,000 fee, break-even is 20 months.

Simple decision frame: if you expect to keep the loan longer than break-even, refinancing may make sense. If not, it may not.

What is a typical refinance fee?

Costs vary by lender, points, and local fees. Credible ranges differ by source because not all quotes include the same line items:

Fannie Mae notes many borrowers pay around 1% to 2% of loan amount in refinance costs.
Freddie Mac notes refinance costs can run around 3% to 6% depending on lender and loan specifics.

In practice, a good planning range is often "a few thousand dollars" up to low five figures depending on balance size and whether you pay points.

Is the "save a full point" rule a good rule?

It is a decent quick filter, but not a complete decision rule.

A full-point drop often creates meaningful monthly savings.
But break-even still depends on your specific fees and term.
Extending back to a new 30-year term can lower monthly payment while increasing total interest.

The stronger method is: run break-even first, then check total cost over time.

What to check before you refinance

Expected time in the home (or before next refinance)
Estimated monthly savings after all costs
Points and lender credits in your quote
Whether you are resetting to a longer term
Cash needed at close vs rolling fees into loan

Use the Refinance Break-Even Calculator

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Sources: Freddie Mac PMMS, Fannie Mae refinance FAQ, Freddie Mac refinance costs overview.