Should You Refinance Your Mortgage in 2026? The 3-Minute Math
Refinancing costs $3,000-8,000 upfront but can save $50,000-200,000 over the life of the loan. Here is how to know if it is worth it in less time than it takes to make coffee.
The decision to refinance comes down to one number: the breakeven point. How many months of savings does it take to recoup the closing costs? If you will stay in your home longer than that, refinancing saves money. If not, you pay closing costs for nothing.
The formula: closing costs divided by monthly savings equals breakeven months. If refinancing from 7% to 5.75% on a $280,000 balance saves $250 per month and costs $5,000 to close, breakeven is 20 months. Stay longer than 20 months and you save money. Move sooner and you lose $5,000.
The Rate Drop That Matters
A 1% rate reduction on a $300,000 mortgage saves approximately $180-200 per month in interest. On a $500,000 mortgage, the same 1% drop saves $300-330 per month. The larger your balance, the more valuable each fraction of a percentage point becomes. This is why high-balance borrowers refinance more aggressively — the absolute dollar savings justify closing costs even for relatively small rate improvements.
The Term Shortening Play
Some refinances are not about lowering the payment — they are about shortening the term. Refinancing from a 30-year at 7% to a 15-year at 5.5% increases the monthly payment by $400-600 but saves $150,000-250,000 in total interest and pays off the home 12-15 years sooner. If you can comfortably afford the higher payment, this is one of the most powerful wealth-building moves available to homeowners.
Run your exact numbers with our refinance calculator — enter your current balance, rate, and remaining term alongside the new rate and term to see monthly savings, breakeven point, and total interest saved.