Worked examples, one stated loan
Rate-drop scenarios
Each scenario uses the same stated example, a $400,000 balance with 27 years left, a new 30-year term, $6,000 of closing costs, and a 7-year stay, so the drops can be compared fairly. They are worked examples to teach the math, not quotes and not predictions. Your balance, fee stack, and horizon will move the answer.
The stated example behind every scenario
| Loan balance | $400,000 | Years left on current loan | 27 years |
| New term | 30 years | Closing costs | $6,000 |
| Stay horizon | 7 years | Rate context | Freddie Mac survey, week released October 1, 2026 |
Change any one of those inputs and the verdict can flip. That is the point of holding them constant here: the only thing moving between scenarios is the size of the rate drop, so you can see what a drop alone is worth before fees, balance, and horizon enter your own calculation. Examples checked October 4, 2026. Method on the methodology page.
How to compare the drops
Watch break-even move
Bigger drops repay the same $6,000 faster. Smaller drops live or die on the fee stack, which is why the closing cost guides matter as much as the rate.
Watch lifetime interest
Every scenario restarts a 27-year loan as a 30-year loan. The payment will flatter the deal. Lifetime interest tells you what the restart costs if you hold the loan to the end.
Then run your loan
Scale the lesson, not the answer. Savings grow roughly with balance while closing costs mostly do not. The calculator applies the same math to your figures.
8% to 6.5%
The widest gap in this set. This is where big drops make refinancing tempting, and where the term restart does the most quiet damage if you compare lifetime interest instead of the payment.
See the worked math
8% to 7%
A one-point drop on a large balance looks modest in advertising and is often plenty, provided closing costs stay controlled and you hold the loan long enough.
See the worked math
7.5% to %
The classic modern refinance: a 2023-era rate moving to something merely normal. The answer turns almost entirely on closing costs and how long you stay.
See the worked math
7.5% to 6%
A point and a half is a large drop. Watch the new term more than the rate; the payment will flatter the deal whether it deserves it or not.
See the worked math
7% to 6%
One point on a $400,000 balance saves real money each month. The break-even test is whether your fee stack lets you reach it.
See the worked math
7% to 5.5%
A point and a half at this level usually wins if you stay, and usually still wins after honest closing costs. The trap is extending the term without noticing.
See the worked math
6.5% to 5.5%
A smaller drop chasing a rate near recent lows. This one is a fee fight: lender credits and points can change the answer more than the rate itself.
See the worked math
6.5% to 6%
The smallest drop in this set and the easiest to oversell. It can work on a large balance with cheap closing costs and a long stay; it fails quietly everywhere else.
See the worked math
New to the fee side of these examples? Read lender fees explained and lender credits explained, then come back and judge the drops again. The rate gets the headline; the fee stack decides most close calls.