{"version":"1.9","identifier":"3fc213ee-846e-46bb-97cf-5855feeeef75","language":"en-US","title":"Refinancing: a one-point rate drop on $300,000 takes 34 months to repay 3% closing costs","layout":{"columns":7,"width":1024,"margin":32,"gutter":20},"componentLayouts":{"text":{"columnStart":0,"columnSpan":7,"maximumContentWidth":720,"margin":{"top":12,"bottom":12}},"photo":{"columnStart":0,"columnSpan":7,"margin":{"top":20,"bottom":20}}},"componentTextStyles":{"default":{"fontName":"HelveticaNeue","fontSize":18,"lineHeight":29,"textColor":"#171717"},"headline":{"fontName":"HelveticaNeue-Bold","fontSize":36,"lineHeight":42,"conditional":[{"conditions":{"maxViewportWidth":480},"fontSize":28,"lineHeight":34}]},"intro":{"fontName":"HelveticaNeue","fontSize":20,"lineHeight":28,"textColor":"#555555"},"caption":{"fontName":"HelveticaNeue","fontSize":13,"lineHeight":19,"textColor":"#666666"},"byline":{"fontName":"HelveticaNeue","fontSize":13,"lineHeight":20,"textColor":"#666666"},"body":{"fontName":"HelveticaNeue","fontSize":18,"lineHeight":29,"paragraphSpacingAfter":14,"linkStyle":{"textColor":"#00704a"}}},"metadata":{"canonicalURL":"https://www.pointsfrog.com/news/mortgage-refinance-break-even-one-point-rate-drop","datePublished":"2026-10-18T23:57:45.174648Z","dateModified":"2026-10-19T00:07:08.627759Z","authors":["Points Frog Editorial"],"excerpt":"Moving from 8.4% to Freddie Mac's 7.4% average cuts the payment by $268 a month. Because the new loan restarts at 30 years, it saves just $2,893 over its life after costs.","thumbnailURL":"https://pub-fac99da959e344fe99d810d309cef7df.r2.dev/photos/article/3fc213ee-846e-46bb-97cf-5855feeeef75/8699a9e3aa4239e2eab0471ee41857c0.jpg","keywords":["other"],"generatorName":"Frog News","generatorVersion":"1.0"},"components":[{"role":"title","text":"Refinancing: a one-point rate drop on $300,000 takes 34 months to repay 3% closing costs","textStyle":"headline","layout":"text"},{"role":"intro","text":"Moving from 8.4% to Freddie Mac's 7.4% average cuts the payment by $268 a month. Because the new loan restarts at 30 years, it saves just $2,893 over its life after costs.","textStyle":"intro","layout":"text"},{"role":"byline","text":"By Points Frog Editorial · Published October 18, 2026","textStyle":"byline","layout":"text"},{"role":"photo","URL":"https://pub-fac99da959e344fe99d810d309cef7df.r2.dev/photos/article/3fc213ee-846e-46bb-97cf-5855feeeef75/8699a9e3aa4239e2eab0471ee41857c0.jpg","caption":"Brick ranch houses on Lake Drive in Bailey Lakes, Ohio. · Nyttend, public domain (Wikimedia Commons)","accessibilityCaption":"Brick ranch houses on Lake Drive in Bailey Lakes, Ohio.","layout":"photo"},{"role":"caption","text":"Brick ranch houses on Lake Drive in Bailey Lakes, Ohio. · Nyttend, public domain (Wikimedia Commons)","textStyle":"caption","layout":"text"},{"role":"body","format":"markdown","text":"When does a lower rate pay back the cost of refinancing? The [mortgage refinance calculator](https://www.pointsfrog.com/mortgage-refinance-calculator) answers with three numbers: the new payment, the month the savings cover the closing costs, and what the new loan saves or costs over its life.\n\nIts example is a $300,000 balance with 27 years left at 8.4%. It is refinanced into a new 30-year loan at 7.4%, Freddie Mac's average for the week of October 15, 2026. The payment drops from $2,345 to $2,077, a saving of $268 a month. Closing costs of $9,000, or 3% of the balance, take 34 months to earn back.\n\n[Try the calculator on Points Frog](https://www.pointsfrog.com/mortgage-refinance-calculator)\n\n## The break-even math\n\nThe calculator uses the same rule as the Federal Reserve's refinancing worksheet: closing costs divided by monthly savings. Here that is $9,000 ÷ $267.50, or 33.6 months, so the refinance pays for itself in month 34. If you might sell or refinance again before then, it loses money.\n\nThe monthly saving is only half the story. A new 30-year loan lowers the payment partly by stretching it out, and here it adds 3 years of payments. The interest left on the old loan is $459,663, and the new loan charges $447,770. After the $9,000 of costs, the lifetime saving is just $2,893. The same refinance over the 27 years left, if a lender offers that term, would save $56,559.\n\n## How big a rate drop it takes\n\nOn the same balance, with the same $9,000 of costs paid at closing, here is what each drop does:","textStyle":"body","layout":"text"},{"role":"htmltable","html":"
Rate dropSaved a monthBreak-evenOver the loan
0.25 points$115Month 79$46,497 lost
0.5 points$165Month 55$30,179 lost
0.75 points$216Month 42$13,714 lost
1 point$268Month 34$2,893 saved
1.5 points$371Month 25$36,519 saved
2 points$477Month 19$70,667 saved
","layout":"text"},{"role":"body","format":"markdown","text":"Today's 7.4% average is only 0.39 points below the 7.79% the 30-year rate reached in October 2023. So on the page's numbers, refinancing for a lower rate now pays mostly on loans well above the average.\n\nThe familiar 1% rule says to refinance once rates fall a full point below yours. The page calls it a rough guide, not a rule, because it ignores closing costs, loan size and how long you'll keep the loan. Economists Sumit Agarwal, John Driscoll and David Laibson worked out when refinancing is best in a 2013 paper in the Journal of Money, Credit and Banking. With costs of $2,000 plus 1% of the loan, the best drop came to 1.07 points on a $1 million loan, 1.39 points on $250,000 and 1.93 points on $100,000. Small loans need bigger drops, because part of the cost is a fixed fee. Their example also assumed a 28% tax bracket and the rates of its time.\n\n## Costs, and whether to roll them in\n\nFreddie Mac says to expect closing costs of 3% to 6% of the loan principal, or $9,000 to $18,000 on $300,000. The median refinance in 2023 had $7,329 in total loan costs, up from $4,979 in 2022, according to a Consumer Financial Protection Bureau report published in December 2024.\n\nRolling the $9,000 into the loan saves cash at closing but costs more over time. The payment rises to $2,139, and break-even moves from month 34 to month 43. The $2,893 lifetime saving turns into a $10,540 cost, because you pay 7.4% interest on the costs for 30 years.\n\nA 15-year refinance at Freddie Mac's 6.71% average works differently. It costs $2,648 a month, $303 more than the current payment, so there is no monthly saving to break even on. But it cuts the interest left from $459,663 to $176,654 and ends the loan 12 years sooner. After closing costs, it saves $274,009.\n\n## What the calculator leaves out\n\nIt models fixed-rate loans paid on schedule, principal and interest only. Property tax and insurance don't change with a refinance, so they are left out. So are mortgage insurance, prepayment penalties, cash-out refinancing and what money could earn elsewhere. Freddie Mac doesn't survey 20-year loans, so that term needs a lender's quote. The page suggests comparing Loan Estimates from several lenders; mortgage credit checks within 45 days count as a single inquiry, according to the CFPB.\n\n## Use it on your own site\n\nThe refinance calculator is free to embed on a blog or website with copy-and-paste code, with no ads or tracking. Here is [how to embed it](https://www.pointsfrog.com/calculators/embed).\n\nSource: [Freddie Mac via FRED](https://fred.stlouisfed.org/series/MORTGAGE30US), week of October 15, 2026; [Freddie Mac on refinancing costs](https://myhome.freddiemac.com/refinancing/costs-of-refinancing), checked October 18, 2026; [CFPB mortgage market report](https://files.consumerfinance.gov/f/documents/cfpb_2023-mortgage-market-activity-and-trends_2024-12.pdf), December 2024; [Federal Reserve refinancing worksheet](https://www.federalreserve.gov/pubs/refinancings/); [Agarwal, Driscoll and Laibson](https://www.nber.org/papers/w13487), 2013. Figures are educational estimates, not financial advice.\n\n## Related reading\n\n* [Mortgage calculator](https://www.pointsfrog.com/mortgage-calculator)\n* [15 vs 30-year mortgage calculator](https://www.pointsfrog.com/15-vs-30-year-mortgage-calculator)\n* [Am I house poor?](https://www.pointsfrog.com/house-poor-calculator)","textStyle":"body","layout":"text"}]}