Got a 2023 mortgage? Refinancing today only lowers your payment if you locked in above 6.90%
• Finance
Two people took out the same $350,000 mortgage in the same year, and only one of them should refinance. The deciding factor is the month they locked their rate.
Key takeaways
- The average 2023 buyer who refinances their loan today would pay $20 more a month.
- If the mortgage was taken at the 7.79% peak in October 2023, refinancing today saves $199 a month.
- Freddie Mac’s 30-year rate would need to fall to about 6.24% for the average 2023 buyer to break even within three years.
- Restarting the 30-year clock costs the peak-rate buyer $26,176 over the life of the loan; keeping a 27-year term instead saves $32,981.
Today's rate is higher than the 2023 average
In 2023, the average 30-year rate was 6.81% (Freddie Mac). Rates were very variable that year, ranging from 6.09% in February to 7.79% in October. At the time, the peak was the highest in 23 years.
Freddie Mac’s latest reading, released on October 29, 2026, is 7.24%, down from 7.32% a week earlier. Today’s rate is 0.43 percentage points above the 2023 average.
Don’t expect the Federal Reserve to bring that number down soon. On October 28, the Fed held its benchmark rate at 3.75%–4%, a month after raising it for the first time since 2023, and two of its policymakers voted for another hike, citing inflation that “remains elevated.”
The Fed doesn’t set mortgage rates, but when it’s thinking about raising rates, mortgage rates rarely fall fast. The next decision comes on December 9.
Worked example: A $350,000 loan from 2023
Let’s assume a $350,000 loan, taken in 2023 for 30 years at 6.81%. It was refinanced after 36 monthly payments into a new 30-year loan fixed at 7.24%. Closing costs: $7,329 (CFPB, median total loan costs for refinance loans); no points, no cash-out.
The original monthly payment amounted to $2,284.07, including principal and interest. After three years, the buyer would’ve paid $11,858 of principal, so the refinanced balance is $338,141.89.
After refinancing, the new monthly payment at 7.24% is $2,304.43. That’s $20.36 more than the original payment, summing up to about $244 a year. With no money saved, the break-even month never comes: $7,329 is never recovered.
If we keep the original payoff date by taking a 27-year refinance, it gets even worse. The monthly payment rises to $2,378.95, or $94.88 more a month.
Refinancing a $350,000 mortgage from 7.79% to 7.24% recovers $7,329 in closing costs after 37 months
Who would come out ahead
The scenario flips for those who locked in at the peak rates in October 2023. A $350,000 loan locked in at 7.79% has a monthly payment of $2,517.12, with an outstanding balance of $340,098.53 after 36 payments.
The monthly payment drops to $2,317.77 after refinancing into a new 30-year loan at 7.24% today—it saves around $199 a month.
$7,329 ÷ $199.36 = 36.8, so the refinance pays for itself in month 37, about three years after closing.
With these assumptions, for a refinance to be advantageous and lower your payment, your current rate would need to be above about 6.90%. The average weekly rates in 2023 remained above that line from early August to mid-December.
A lower payment isn't the same as paying less
You have to remember that part of the monthly savings come from restarting your 30-year loan, as opposed to continuing with just 27 years to go.
For the 7.79% buyer, the 27 years left on the old loan add up to $815,548 in payments, while a new 30-year loan costs $841,724, including closing costs. That’s $26,176 more over the life of the loan.
So, when the 27-year loan would’ve been paid off, the 30-year loan continues for another three years, with an outstanding balance of $74,798.
Refinancing into a 27-year loan instead keeps the original payoff date. The 7.79% buyer’s payment drops to $2,392.71, saving $124.41 a month. Break-even moves to month 59, but the refinance ends up $32,981 cheaper over the life of the loan.
Does this apply to you?
The break-even point of your refinancing—or lack thereof— depends on three things: the rate of your current loan, the remaining balance, and the costs of closing your refinancing.
For the average 2023 buyer who got their loan at 6.81%, the current rates would have to fall to about 6.61% to break even within five years. For the 2023 peak 7.79% buyer, every $1,000 of refinancing costs pushes the break-even point back five months.
If you sell or refinance again before the break-even month, the closing costs aren't recovered.
Read also
Methodology
2023 average: mean of the 52 weekly 30-year fixed readings in Freddie Mac's PMMS (Jan. 5–Dec. 28, 2023) = 6.81%. Working example loan: $350,000, 30-year fixed, monthly payments, principal and interest only (no taxes, insurance or PMI); refinanced after 36 payments; no points; no cash-out. Closing costs: $7,329, CFPB median total loan costs for refinance loans, 2023 HMDA data. This median includes discount points paid by some borrowers, so it's on the high side for a no-points refinance.
7.24% is the PMMS purchase rate used as a stand-in for refinance rates. Refinance quotes are often higher, which would push break-even later.
Sources
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