How do I know if a 1% refinance is worth it?

Divide your closing costs by the monthly savings to get the break-even months, then compare it with how long you expect to keep the loan.

Does the 1% rule apply to small loans?

Less reliably. Flat fees make up a bigger share of costs on small loans, so break-even can take longer.

Should I restart a 30-year term?

It lowers the payment the most but extends your payoff date. Compare total interest with your remaining years, or consider a 20- or 15-year term.

Does refinancing for 1% hurt my credit?

Applying adds a hard inquiry, which may lower scores slightly for a short period. Rate shopping within a short window is generally treated as one inquiry by common scoring models.

Are the rates in this example real quotes?

No. They use the Freddie Mac PMMS weekly average, a national purchase-mortgage benchmark, as a starting point. Your own offer may differ.

Guide

Is it worth refinancing for 1%?

Usually yes: on a $300,000 loan, dropping from 8.13% to 7.13% saves about $206 a month and recovers 2% closing costs in 30 months. It's worth it if you'll keep the loan longer than that break-even point.

Last reviewed November 13, 2026 · Examples use this week's rates

30-yr fixed avg 7.11% as of November 12, 2026

Source: Freddie Mac PMMS

Why 1% is a common rule of thumb

A full percentage point lowers the payment enough on most loan sizes that the savings cover typical closing costs within a few years. That is where the old "refinance when rates drop 1%" rule comes from. It is a shortcut, not a law — the real test is break-even: closing costs divided by monthly savings.

Larger balances reach break-even faster because the same rate drop saves more dollars each month while closing costs, as a percentage, stay about the same. Smaller balances can take longer, because some fees are flat regardless of loan size.

When a 1% drop isn't enough

If you plan to sell or refinance again before break-even, you lose money even with a lower rate. Restarting a 30-year term can also cost more total interest if you're already many years into your current loan, even though the payment falls. Run the numbers with your actual years remaining in the main refinance calculator.

Fees matter too. A rate that is 1% lower but comes with points or high lender fees can have a longer break-even than a slightly higher rate with lower costs. Compare Loan Estimates from several lenders on the same day.

When less than 1% can still work

If your balance is large, closing costs are low, or you're also removing mortgage insurance, a smaller drop can pay off quickly. See our guide on refinancing for half a percent for the same math at 0.5%.

Worked example at this week's rates

$200,000 from 8.13% to 7.13%: saves $138/month, $49,521 in lifetime interest, break-even in 30 months at 2% closing costs.
$300,000 from 8.13% to 7.13%: saves $206/month, $74,281 in lifetime interest, break-even in 30 months at 2% closing costs.
$500,000 from 8.13% to 7.13%: saves $344/month, $123,802 in lifetime interest, break-even in 30 months at 2% closing costs.

Rates are Freddie Mac PMMS weekly averages — a national purchase-mortgage benchmark, not a local refinance quote. Closing costs are estimated at 2% unless stated, and payments are principal and interest only.

Run your own numbers

Use the Refinance break-even calculator with your balance, rate and costs. Or see a worked scenario: $300,000 from 7.5% to 6.5%.

Estimates only. Default rates are Freddie Mac PMMS weekly averages — a national purchase-mortgage benchmark, not a local refinance quote. Payments are principal and interest only. reficalculator.com is not a lender or broker; see how we calculate.

Frequently asked questions

How do I know if a 1% refinance is worth it?: Divide your closing costs by the monthly savings to get the break-even months, then compare it with how long you expect to keep the loan.
Does the 1% rule apply to small loans?: Less reliably. Flat fees make up a bigger share of costs on small loans, so break-even can take longer.
Should I restart a 30-year term?: It lowers the payment the most but extends your payoff date. Compare total interest with your remaining years, or consider a 20- or 15-year term.
Does refinancing for 1% hurt my credit?: Applying adds a hard inquiry, which may lower scores slightly for a short period. Rate shopping within a short window is generally treated as one inquiry by common scoring models.
Are the rates in this example real quotes?: No. They use the Freddie Mac PMMS weekly average, a national purchase-mortgage benchmark, as a starting point. Your own offer may differ.