Mortgage rates peaked at ~8% in late 2023 and have trended down since. As of June 2026, 30-year conventional rates are averaging 6.4–6.8% depending on credit score and LTV. If you locked in above 7%, refinancing math is starting to look attractive again. Use a mortgage refinance calculator to run your specific numbers — input your current balance, rate, and closing costs to find your exact break-even point.
The Break-Even Rule
Refinancing costs typically 2–5% of the loan balance in closing costs (appraisal, title insurance, origination). On a $400,000 mortgage, that's $8,000–$20,000. Divide closing costs by monthly savings to find your break-even in months. If you plan to stay in the home for longer than that, refinancing wins.
Example: $12,000 closing costs, $200/month savings = 60-month break-even (5 years). If you plan to stay 7 years, refinance. If you're selling in 2 years, don't.
Rate Reduction Threshold
The traditional rule of thumb: refinance if you can drop your rate by 0.75–1.0%. With closing costs of 2%, the math only works if you hold the loan long enough. Some lenders offer no-closing-cost refinances with a slightly higher rate — worth comparing.
Cash-Out Refinance
If home equity has appreciated and you need liquidity, a cash-out refinance lets you pull out above your existing loan balance. Current LTV limits are typically 80% max (meaning you need 20% equity to do this cleanly). At $400K home value, you could cash out up to $80,000 minus your existing loan balance.