3 homeowner types who should consider refinancing their mortgage now
When inflation hit a decades-high in June 2022, interest rates soon followed. Following multiple hikes from the Federal Reserve, the federal funds rate hit its highest point in decades last July – and it has remained untouched since that point. Against this backdrop, rates on borrowing products surged as well, with mortgage rates rising to their highest point since 2000. Homebuyers looking for their dream home and homeowners looking to refinance, then, were stuck with few options.
But the rate climate is slowly changing again. Consecutive reports showing drops in the inflation rate have caused rates to fall slightly in anticipation of a formal cut to the federal funds rate. And while many were hopeful that multiple cuts would be issued in 2024, at least one still appears likely for this year. These changes, albeit minimal, may cause some homeowners to reconsider refinancing. Before acting, however, it helps to know if a refinance could truly be valuable for your situation. To that end, we gathered a list of homeowner types below who may want to consider refinancing their mortgage now.
Start by seeing what mortgage refinance rate you could qualify for here.
3 homeowner types who should consider refinancing their mortgage now
Are you considering a mortgage refinance loan? It may be worth it if you fall into one or more of these three categories:
Homeowners who bought their home in 2023
Mortgage rates hit 7.79% in November 2023, according to Freddie Mac, but are averaging around 7% right now. If you purchased your home toward the end of 2023, or at other times when mortgage rates were high, you may benefit from refinancing now. Just carefully weigh the closing costs against what you stand to save with a lower rate and plan to remain in the home long enough to recuperate those costs; otherwise, it won't be worth making the switch.
Start shopping for mortgage refinance rates here now.
Homeowners who can get a rate a full percentage point lower
Most experts would say a mortgage refinance is worth it if you can get a new rate that's a full percentage point lower than your current one. And for select homeowners, that may be the case right now, particularly if you shop around to find the lowest rate possible. Even half a percentage point lower could result in substantial savings both in your monthly payment and what you will pay in interest over the loan's lifespan. So, crunch the numbers now to see how much you could save.
Homeowners who have an adjustable-rate mortgage
An adjustable-rate mortgage is one in which the rate adjusts over time, sometimes higher and sometimes lower. While this may have been an advantage for some homeowners in recent years thanks to a below-average rate, it may be less appealing now with rate cuts looming.
Considering this possibility, then, some homeowners may benefit from refinancing from their adjustable-rate mortgage to a fixed one instead. Not only may the latter offer a lower rate, but it will offer predictability and reliability that an adjustable rate mortgage simply can not.
The bottom line
While today's mortgage rate environment is still far higher than what was being offered in 2020 and 2021, it's much better than what many buyers secured in 2023. So if you bought a home then, the savings a refinance may offer now could be valuable for you. Similarly, if you can secure a rate a full percentage point lower than what you already have, it may be worth acting now and if you have an adjustable-rate mortgage, today's slightly lower average rate may justify refinancing to a fixed version instead.
Have more questions? Learn more about your mortgage options online today.
