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The “marry the house, date the rate” approach gained momentum in recent years, as homebuyers hoped landing a house they loved, while worrying about securing a lower mortgage rate later via refinancing, would pan out.
But the days of the 3% 30-year average mortgage rate are long gone. As of Aug. 21, the average 30-year mortgage rate stands at 6.58%, according to Freddie Mac. While this represents a slight decrease and “its lowest level since October 2024,” according to Realtor.com® Senior Economist Jake Krimmel, the figure is more than double what it was on Aug. 26, 2021: 2.87%.
As such, a new Neighbors Bank analysis finds that refinancing won’t pay off for most unless mortgage rates drop by at least 0.75 percentage points. And depending on which state you live in, the savings can widely vary.
The report, “If Mortgage Rates Fall Tomorrow, Who Wins?” shows more minor drops of 0.25% to 0.5% “often fail to deliver short-term savings, with the typical borrower still underwater on closing costs after three years.”
These new findings go against the belief that any decrease in rate, no matter how small, translates into a good time to refinance. With the anticipated fall rate cut from the Federal Reserve, owners looking to “break up” with their rate should carefully weigh their options before jumping ship.
“How we frame it for clients: Marry the life you want and date the math. If the home advances your life goals, make the numbers work today and treat any future refi as upside,” advises Tami Pardee, founder and CEO of Pardee Properties, a California-based real estate brokerage.
Different mortgages mean different savings
The good news is the report found that every state eventually breaks even within five years. However, the amount of savings varies significantly among states.
“For example, New Hampshire borrowers, who have an average borrowing amount of $430,247, see nearly $3,000 more in five-year savings after refinancing at a 0.5-point rate drop than homeowners in Louisiana, who have an average loan amount of $252,075,” according to the report.
Bobbi Rebell, CFP, personal finance expert at CardRates.com, says that many real estate agents love to tell prospective buyers that they should “marry the house and date the rate” to land the sale, but that homeowners need to understand the risk they’re taking.
“The math on that doesn’t always work because rates don’t always move as much as needed in a meaningful timeline,” she says, adding that, in general, most homeowners will only benefit from a rate drop of close to a full percent when the costs of refinancing are factored.
She adds, however, that doesn’t mean homeowners should stay on the sidelines—they just should not put together a budget on the assumption that rates will definitely drop.
“In other words, if rates are too high for what you can afford right now, consider adjusting your search criteria rather than waiting for something that may or may not happen,” she says.
For instance, she notes that buyers might adjust their purchase price and consider looking in less expensive areas or for smaller homes with space to add later.
“Maybe even put in lower bids for homes that are just a bit out of reach. Focus on things that are in your control, not in the control of the lenders,” she says.
Eric Croak, CFP, president at Croak Capital, echoes the sentiment, saying that waiting for a 0.5-point drop sounds great—but is often just wishful thinking.
“If your breakeven is four years away, you’re betting on everything being exactly stable. Rates move. Life moves. If you’re sure of your time frame and you love that house, great. If not, quit hoping for a miracle rate and deal with what’s in front of you,” he advises.
Top 10 states where refinancing pays off the fastest
Under a 0.5-point rate drop, only 10 states offered savings within three years, according to the analysis. The breakeven point is “when savings from a lower rate outweigh upfront closing costs—within about three years to make refinancing worthwhile.”
1. New Hampshire
Breakeven years: 2.8
3-year savings: $316
5-year savings: $4,103
2. Colorado
Breakeven years: 2.8
3-year savings: $295
5-year savings: $4,712
3. California
Breakeven years: 2.8
3-year savings: $405
5-year savings: $6,553
4. Washington
Breakeven years: 2.9
3-year savings: $223
5-year savings: $5,047
5. District of Columbia
Breakeven years: 2.9
3-year savings: $231
5-year savings: $6,766
6. Hawaii
Breakeven years: 2.9
3-year savings: $200
5-year savings: $6,488
7. Missouri
Breakeven years: 2.9:
3-year savings: $72
5-year savings: $2,424
8. Montana
Breakeven years: 3.0
3-year savings: $52
5-year savings: $3,773
9. Utah
Breakeven years: 3.0
3-year savings: $54
5-year savings: $4,087
10. Alaska
Breakeven years: 3.0
3-year savings: $71
5-year savings: $3,412
When does refinancing make sense?
As the report shows, refinancing generally makes sense when the rate drop is big enough—usually 0.75% or more—or when it substantially improves cash flow.
But Sergio Altomare, co-founder and CEO of Hearthfire Holdings, a real estate private equity and development company, says that two other factors are just as critical: the original loan’s age and the home’s appreciation.
“If a property has gained value, a refinance may unlock equity that can be pulled out and invested elsewhere for higher returns. And if you’re several years into a loan, refinancing resets the amortization clock, which can change how much the payment actually falls. Those dynamics often matter more than the rate in isolation,” he explains.
Experts say refinancing usually doesn’t make sense when the rate drop is less significant, as it doesn’t justify the costs.
Shmuel Shayowitz, president and chief lending officer of Approved Funding Corp., says that refinancing only makes financial sense when the math works out, and too many buyers assume they’ll be able to refinance quickly and easily.
“Between closing fees, escrows, and time, you need a meaningful rate shift—typically at least 0.75% or more—to see real savings in a reasonable timeframe,” he says. “Refinancing makes sense when two things align: You’re getting a significant enough rate reduction, and you plan to stay in the home long enough to break even. If either piece is missing, it’s usually not worth it.
“Waiting around for a minor dip in rates isn’t a strategy … it’s speculation. If you’re buying a home now, do it because the price makes sense, you can comfortably afford the payment as it is, and it fits your life, not just because you’re hoping for a better rate later.”