Should You Refinance Your Mortgage? How to Run the Numbers in 2026

Last updated 10/08/2026 by

Andrew Latham

Summary:

Refinancing makes sense when the money you save each month pays back your closing costs before you sell or refinance again, and when you don’t quietly add years of interest by restarting a 30-year clock. With the average 30-year rate at 7.40% in early October 2026, most people who bought before 2023 should leave their mortgage alone. If you locked in near 8% in late 2023, or you’re paying PMI you no longer need, run the numbers below.

Every time rates move, my inbox fills up with the same question: should I refinance?

Usually the honest answer is “it depends,” and that answer is useless. So let’s make it useful. Whether a refinance is worth it comes down to a few numbers you can work out yourself in about 10 minutes: your current rate, the new rate, your closing costs, how long you’ll stay, and how many years you have left on the loan.

Here’s how to run them, and where people get burned.

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What refinancing actually does

A refinance pays off your current mortgage with a brand-new one. New rate, new term, new closing costs. That last part is what people forget. A refinance isn’t a rate adjustment. It’s a whole new loan, and you pay to get it.

There are two main types:

Rate-and-term refinance. You swap your loan for one with a better rate, a different length, or both. Your balance stays about the same.
Cash-out refinance. You borrow more than you owe and pocket the difference. The new rate applies to the entire balance, not just the cash you took out. We break this down in cash-out vs. rate-and-term refinance.

There are also streamlined versions for government-backed loans, like the FHA streamline and the VA IRRRL. They typically need less paperwork, and sometimes no appraisal.

Where rates stand right now

As of October 8, 2026, the average 30-year fixed rate is 7.40% and the 15-year is 6.73%, according to Freddie Mac’s weekly survey. A year ago the 30-year was 6.30%.¹

Now look at what people are actually holding. Based on Federal Housing Finance Agency data for the second quarter of 2026, about 49% of outstanding mortgages carry a rate below 4%. Only about 22.5% are at 6% or higher.^2,3

So for roughly half of homeowners, a rate-and-term refinance today would raise their rate, not lower it. If that’s you, you can stop here. Your mortgage is one of the best assets you own. Keep it.

The people this article is really for are in that 22.5%. They’re mostly folks who bought or refinanced in 2023 and 2024 when rates spiked, plus anyone with PMI they’d like to get rid of.

Step 1: Find your break-even point

The break-even point is how many months it takes for your monthly savings to cover your closing costs. Divide your total closing costs by your monthly savings. That’s it.

Closing costs are bigger than most people expect. Freddie Mac says to plan on 3% to 6% of your loan principal, which covers appraisal, title, origination, recording, and underwriting fees.⁴ On a $389,000 loan, 3% is $11,670.

Here’s a real-world case. Say you bought in November 2023 with a $400,000 loan at 7.8%. Your principal and interest payment is about $2,879. Three years in, you owe about $389,000.

If you refinance today at 7.40%: your new 30-year payment is about $2,693. You save $186 a month. Divide $11,670 by $186 and you get about 63 months. That’s more than five years before you break even. Move or refinance again before then and you lose money.

If rates fall to 6.5%: your new payment is about $2,459, which saves $421 a month. Break-even drops to about 28 months. Now we’re talking.

My rule of thumb: if you’re confident you’ll stay in the home at least a year past your break-even point, the refinance is worth a serious look. If break-even is past five years, I’d usually pass. Too much can change in five years, like a job move, a growing family, or another chance to refinance at an even better rate.

You’ve probably heard the old rule that you should only refinance if you can drop your rate by 1 percentage point. Ignore it. It doesn’t account for your loan size or your closing costs. A half-point drop on a $700,000 loan can beat a full point on a $150,000 loan. Do the break-even math instead.

Step 2: Watch out for the reset-the-clock trap

This is the mistake I see most often, and lenders won’t flag it for you.

When you refinance into a new 30-year loan, you restart the 30-year clock. A lower payment can hide a higher total cost, because you’re spreading the balance over more years.

Go back to our borrower. They have 27 years left on their original loan, and the remaining interest on it is about $544,000.

If they refinance into a new 30-year loan at 7.40%, the monthly payment drops by $186. But total interest on the new loan comes to about $581,000, and they’re also paying $11,670 in closing costs. All in, they’d pay roughly $48,000 more than if they’d left the loan alone. The payment went down and the total cost went up.

The fix is simple. Refinance into a term that matches what you have left, or shorter. Plenty of lenders will write a 20- or 25-year loan, and the CFPB specifically suggests asking about a custom term.⁵

Same borrower, refinancing at 6.5%:

A new 30-year loan saves about $36,000 in total cost after closing costs.
A 27-year loan (matching their remaining term) has a payment of about $2,550 and saves about $95,000.

Same rate, same borrower. Choosing the right term nearly triples the savings.

Step 3: Decide what you’re actually trying to fix

“Lower my rate” isn’t the only good reason to refinance. Here are the ones I think hold up:

Paying off the house faster. Refinancing to a 15-year at today’s 6.73% average would raise our borrower’s payment by about $559 a month, to roughly $3,438. In exchange, they’d pay about $230,000 in total interest instead of $544,000. That’s a savings of over $300,000 even after closing costs. It’s only worth doing if the bigger payment doesn’t squeeze your emergency fund or retirement contributions.

Dropping mortgage insurance. On a conventional loan, you can ask your servicer to cancel PMI once your balance is scheduled to hit 80% of the home’s original value, and it generally drops off automatically at 78%.⁶ The catch is that those milestones are based on the original value, not today’s value. If your home has appreciated a lot, a refinance with a new appraisal might get you below 80% years earlier. FHA loans are different. If you put down less than 10% on an FHA loan after mid-2013, the mortgage insurance usually lasts for the life of the loan.⁷ Refinancing into a conventional loan is often the only way out.

Getting out of an adjustable rate. If your ARM is about to reset higher, locking in a fixed rate can be worth it even if the fixed rate isn’t great. That’s especially true when the reset could add hundreds to your payment. What you’re buying is certainty.

Removing someone from the loan. After a divorce, refinancing is usually the only clean way to take an ex-spouse off the mortgage. We cover how that works in cash-out refinance after divorce.

Getting cash. I’m the most skeptical about this one right now. If your current rate is well below today’s rates, a cash-out refi reprices your whole balance to get at a slice of equity. For most people with a low first mortgage, a HELOC or home equity loan is the cheaper tool. Compare your options in home equity loan vs. cash-out refinance. And know that conventional cash-out refinances generally require your current mortgage to be at least 12 months old.⁸

IS REFINANCING WORTH IT?

Here is a list of the benefits and the drawbacks to consider.

Step 4: Don’t fall for “no-cost” refinancing

You’ll see ads for refinances with no closing costs. The costs are still there. They’re just hidden. Freddie Mac puts it bluntly: “There is no such thing as a free loan.” The lender is usually either charging you a higher rate or rolling the costs into your balance.⁴

That’s not automatically a bad deal. If you might move in two or three years, taking a slightly higher rate with no upfront cost can beat paying $11,000 at closing that you’ll never earn back. Just know which deal you’re getting, and compare it on the Loan Estimate against a version where you pay the costs upfront. Want to see your options? Start with our comparison of no-closing-cost refinance lenders.

Step 5: Shop at least three lenders

This is where the real money is, and almost nobody does it well. Freddie Mac’s own guidance is that getting multiple quotes can save you thousands over the life of the loan.¹

Ask each lender for an official Loan Estimate on the same day, for the same loan amount and term. Then compare three numbers side by side: the interest rate, the APR, and the total in Section A (origination charges). The APR folds fees into the rate. So if one lender’s rate is lower but its APR is higher, that lender is making it up on fees.

Don’t forget your current servicer. They sometimes waive fees to keep your loan, and sometimes they won’t. Either way, it’s one more quote.

So, should you refinance?

Here’s my short version:

Your rate is below 6%? Leave it alone unless you need to remove a borrower or escape an ARM.
Locked in at 7.5% to 8% or higher? Run the break-even math now, and set a rate alert so you’re ready if rates dip.
Paying PMI on a home that’s gone up in value? Get a quote. This one often pencils out even when rates aren’t great.
Thinking about cash-out with a low first mortgage? Price a HELOC first.
Whatever you do, don’t restart a 30-year clock without checking the total interest.

If the numbers work, compare offers on our mortgage refinance lender reviews. And if you’re not sure what a new payment does to the rest of your budget, the SuperMoney app shows your income, spending, and debt payments in one place, so you can see the trade-off before you sign.

Keep going: more refinance guides

How to refinance your mortgage, step by step
Not sure the savings are real? Calculate your refinance break-even point
Refinancing to get rid of PMI or FHA mortgage insurance
Thinking about skipping closing costs? Read how a no-closing-cost refinance really works

Key takeaways

The average 30-year fixed rate was 7.40% on October 8, 2026, up from 6.30% a year earlier.
About half of outstanding mortgages are below 4%, so refinancing for rate doesn’t make sense for most homeowners right now.
Budget 3% to 6% of the loan for closing costs, per Freddie Mac. That’s $11,670 to $23,340 on a $389,000 loan.
Break-even is closing costs divided by monthly savings. Past five years, I’d usually pass.
A new 30-year loan at 7.40% could cost our example borrower about $48,000 more than keeping their 7.8% loan.
Matching the remaining term instead of resetting to 30 years nearly tripled the savings at 6.5%.

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Andrew Latham

Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.

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