For some homeowners, now may be a good time to refinance. Getty Images
When inflation hit its highest level in decades in June 2022, interest rates quickly followed suit. Following multiple rate hikes by the Federal Reserve, the federal funds rate hit its highest level in decades last July and has remained steady since then. Against this backdrop, interest rates on borrowing products also skyrocketed, with mortgage rates rising to their highest since 2000. Home buyers looking for their dream home or homeowners looking to refinance were left with few options.
However, the interest rate landscape is slowly changing again. A series of reports showing a decline in inflation has caused interest rates to drop slightly in anticipation of an official cut in the federal funds rate. While many expected multiple cuts in 2024, it seems more likely that at least one cut will come this year. These changes, even if slight, could cause some homeowners to reconsider refinancing. However, before taking action, it helps to know whether refinancing is really worth it for your situation. To that end, we have listed below the types of homeowners who may want to consider refinancing their mortgage right now.
First, check the mortgage refinance rates you qualify for here.
3 Types of Homeowners Who Should Consider Refinancing Their Mortgage Now
Are you considering refinancing your mortgage? If you fall into one or more of these three categories, it may be worth it.
Homeowners who purchased a home in 2023
Mortgage rates peaked at 7.79% in November 2023, but currently average about 7%, according to Freddie Mac. If you bought a home around the end of 2023 or during a time when mortgage rates were higher, you may benefit from refinancing now. You should carefully weigh your closing costs against the amount of money you could save if interest rates fall, and make a plan to stay in the home long enough to recoup those costs. Otherwise, it may not be worth it to refinance.
Start researching mortgage refinance rates here today.
People who can own a home with interest rates one percentage point lower
Most experts will say that refinancing your mortgage is worth it if you can get a new interest rate that's one percentage point lower than your current rate. And for some homeowners, that may be the case right now, especially if you shop around to find the lowest possible rate. Even a half-percentage point lower can add up to big savings in both your monthly payment and the interest you'll pay over the life of your loan. So do the math now to see how much you could save.
Homeowners with adjustable-rate mortgages
An adjustable-rate mortgage is a mortgage with an interest rate that adjusts over time, sometimes higher and sometimes lower. While below-average interest rates may have been a good deal for some homeowners in recent years, with interest rate cuts on the horizon, they may not be as appealing now.
Given this possibility, some homeowners may benefit from refinancing their adjustable-rate mortgage to a fixed-rate mortgage, which not only offers lower interest rates, but also predictability and reliability that an adjustable-rate mortgage cannot.
Conclusion
The current mortgage rate environment, while still much higher than what was offered in 2020 and 2021, is much better than what many buyers secured in 2023. So if you bought a home then, the savings you could get by refinancing could be valuable. Similarly, if you can secure an interest rate a percentage point lower than current rates, it may be worth acting now. And if you have an adjustable-rate mortgage, today's slightly lower average rates may justify refinancing to a fixed rate.
Have more questions? Learn more about your mortgage options online today.
Matt Richardson