WORDS I LIKE — Truth beats comfortable assumptions.
For years, the rule was simple.
Wait until rates drop a full point. Then refinance.
That's the math everyone learned.
It's also outdated.
Refinance applications just hit a 12-month high — and most of the people refinancing aren't getting a one-point drop.
The detail that changes the decision.
The 1% rule says don't refinance unless you can drop your rate by a full point. It's a shortcut. It ignores the three numbers that actually matter. Your loan balance. Your monthly savings. And how long you'll stay in the house.
Rates are down more than half a point from last year. Refinance applications are up 62% year over year. People who bought in 2023 or 2024 at over 7% suddenly have a real case. Even without that full-point drop.
The right question isn't whether the rate dropped enough. It's how long it takes to earn back the closing costs. And whether you'll still be in the house by then. If your monthly savings cover those costs in two years and you plan to stay five, the math works. The rate drop almost doesn't matter.
This hits anyone who bought at the top of the rate cycle. Bigger loan balances mean smaller rate drops still produce real monthly savings. The 1% rule was built for smaller loans and shorter timelines. It quietly tells modern borrowers to wait when they shouldn't.
THIS WEEK'S TAKEAWAY
The right rate drop is the one that pays itself back before you move.
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PS
If you bought in 2023 or 2024, the math may already work. Reply with "math" and I'll show you the break-even on your loan.
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— Neil Christiansen, Certified Mortgage Advisor
