Your refinance trigger rate
By Samprit Biswas, editor · Updated October 8, 2026
A lower rate is not, on its own, a reason to refinance. Each refinance costs money, and rates may fall further, so refinancing at the first small drop can cost you a better chance later. Your trigger rate is the rate at which refinancing your loan pays on average, once both are counted.
What sets it
Your loan sets most of it: the balance, the rate, the years left and the closing costs. A larger balance lowers the bar, because the same drop in rate saves more dollars. Higher closing costs raise it, and so does a short time left on the loan.
The assumptions behind it
The rest are assumptions about the future, the published model's own: a 5% real discount rate; a 10% chance each year that you move; 3% inflation; rates that swing by 1.09 percentage points a year; a 0% tax rate, unless you itemize.
A model's assumptions. · Agarwal, Driscoll and Laibson, dated Oct 6, 2026
Sources and licences
The trigger follows Agarwal, Driscoll and Laibson, "Optimal Mortgage Refinancing: A Closed-Form Solution", Journal of Money, Credit and Banking, 2013, with that paper's assumptions except the tax rate.
Why not just break-even?
Break-even asks whether a new loan repays its costs. It ignores that rates keep moving: if you refinance today, you give up the chance to refinance lower later, and that chance is worth something. The economists Sumit Agarwal, John Driscoll and David Laibson worked out the rate at which the saving outweighs it. Their answer is the trigger.
It moves as your loan does
Each payment lowers your balance and shortens the years left, so your trigger drifts over time. Check your loan again every few months, or let an alert watch today's estimate for you.
How to cite this page
InfinityRateWatch. "Your refinance trigger rate." https://infinityratewatch.com/learn/refinance-trigger-rate/. Data as of Oct 8, 2026.