Should you refinance — or keep the rate you have?

How does the verdict work?

Most refinance advice uses the "1% rule": refinance when rates drop one point below yours. Research says that rule is wrong for most people. We instead compute your threshold with the closed-form optimal-refinancing model published by economists Sumit Agarwal, John Driscoll, and David Laibson (NBER Working Paper 13487), which accounts for the option value of waiting — refinancing on a small dip wastes the chance that rates keep falling. In the authors' own words:

"We derive the first closed-form optimal refinancing rule: Refinance when the current mortgage interest rate falls below the original rate by at least 1/ψ [φ + W(−exp(−φ))]." Agarwal, Driscoll & Laibson, Optimal Mortgage Refinancing: A Closed Form Solution, NBER Working Paper 13487

We combine that threshold with plain break-even math: closing costs divided by monthly savings, checked against how long you plan to stay. Read the full explanation of the formula, including what it does and doesn't account for.

A worked example. Say you locked 7.99% in November 2023 on a $420,000 balance, and the market rate for your profile is 6.58%. Your gap is 1.41 points — past your computed threshold of about 1.07 points. Refinancing saves roughly $481 per month, breaks even on ~$5,150 of closing costs in about 11 months, and avoids about $122,800 of interest if you keep the same payoff date. Verdict: REFI. But if you locked 3.25% in 2021, you're beating today's market by more than 3 points — your rate saves you about $733 every month versus borrowing the same money today. Verdict: KEEP.

Why three verdicts? Between KEEP and REFI there's GETTING CLOSE — your gap is real money but still under your threshold, where the math says refinancing works but waiting is smarter. That's the zone to start paying attention.

The rate gap is only one of four conditions that have to line up — see when you should refinance for the break-even horizon, the qualification and seasoning rules, and the term-reset trap.

How big a rate drop do you need?

Bigger loans need smaller drops. Per the NBER model — using typical estimated closing costs, a ~7-year expected stay, and no mortgage-interest deduction (most households take the standard deduction) — the rate drop that justifies refinancing looks like this:

What are mortgage rates right now?

For the week of July 23, 2026: the average 30-year fixed is 6.58% and the 15-year fixed is 5.96% (Freddie Mac Primary Mortgage Market Survey). Over the past 18 months the 30-year has ranged from roughly 5.98% to 6.95%, touching its low in early 2026 — a dip that briefly put nearly 5 million homeowners "in the money" for a refinance (ICE Mortgage Monitor). Moves of even a tenth of a point swing millions of borrowers in or out of refinance range — which is exactly why we check every week. This page updates every Thursday when the survey publishes.

Research suggests watching matters: about 20% of households who should refinance simply never do, forgoing a median of roughly $11,500 each (Keys, Pope & Pope, Journal of Financial Economics). As the authors put it, the losses come from "a failure to refinance" — inattention, not bad math.

Frequently asked questions

Is 6.5% a good mortgage rate in 2026?

It's close to the national average — the 30-year fixed averages 6.58% this week (Freddie Mac), and rates have ranged from about 5.98% to 6.95% over the past 18 months. Whether refinancing makes sense depends on your own rate, balance, and plans — not the average alone. The calculator above answers for your numbers.

Is the 1% rule for refinancing still valid?

Not as a universal rule. The optimal threshold depends on loan size: roughly 1.7 points for a $100,000 balance but about 0.9 points for $1,000,000 (see the table above). A flat 1% refinances small loans too early and big loans too late. Here's why the rule is wrong and what replaces it.

How much does it cost to refinance?

Typically 2–6% of the loan amount; Freddie Mac cites about $5,000 on average. Origination, appraisal, and title fees make up most of it. We estimate costs from your balance, and you can enter an exact quote instead.

Does using KeepOrRefi affect my credit score?

No. We never pull credit and never ask for your name, address, or Social Security number. You enter a rate and balance; we do math. Your credit is only pulled when you actually apply with a lender.

When should I refinance my mortgage?

When the market rate for your profile is far enough below your current rate to cover closing costs and the value of waiting — and you'll stay past the break-even point. For most balances that's a drop of 0.9–1.7 points. Enter your numbers above for your exact answer, or get the verdict emailed every Thursday.

Where the numbers come from

Market rates: Freddie Mac Primary Mortgage Market Survey (published Thursdays) and Optimal Blue Mortgage Market Indices, both via FRED®. Your "market rate for your profile" applies estimated credit-score and equity adjustments to the national average — it's a benchmark, not a quote; an actual offer will differ. Refinance threshold: the closed-form model of Agarwal, Driscoll & Laibson (NBER w13487), computed exactly (Lambert-W solution) with your balance, costs, and expected stay. Break-even: closing costs ÷ monthly savings, and an honest same-payoff-date interest comparison that doesn't inflate savings by stretching your term. This page is updated every Thursday; verdicts reflect that week's survey.

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