With mortgage rates falling, should you consider refinancing your home?

A significant 84.2% of Americans have mortgage rates below 6%, according to analysis from Redfin, but there are still millions who could benefit from refinancing. Chase Home Lending estimates that around 4.7 million homeowners could see advantages if rates drop beneath 6%. Recently, the widely used 30-year fixed-rate mortgage has been around 6.08%, its lowest point in two years, leading many property owners to contemplate refinancing.

Simple calculations indicate that a borrower with a $375,000 mortgage obtained during times when rates exceeded 7% could potentially save over $200 each month, noted Bill Banfield, the chief business officer of Rocket Companies.

However, it’s essential for borrowers to balance this potential saving against the costs of closing a new loan. According to Banfield, a good guideline for refinancing is to ensure you can recover your closing costs in about two to three years. If you plan to move within a year or two, refinancing might not be worthwhile.

Will mortgage rates decrease further?

If refinancing would help your finances, experts advise against waiting for even lower rates.

“We think it’s unwise for customers to try and precisely time the market,” stated Nina Gidwaney, head of refinance and home equity at Chase Home Lending. “That’s a challenging task. If you see a chance to save, seize it.”

Many experts expect the currently low rates already consider the market’s prediction that interest rates may continue to decrease. However, Daryl Fairweather, chief economist at Redfin, noted that there might be fluctuations in mortgage rates in the upcoming months.

Political uncertainty is partly causing these fluctuations, Fairweather explained to YSL News. “Once we know who will be our next president, it should help reduce some uncertainty.” Additionally, when the Federal Reserve prepares for significant changes, like lowering interest rates for the first time in many years, market adjustments might take time to stabilize, she added.

If you’re still considering trying to wait for the perfect moment in the market, remember that fluctuations may lead to rates rising briefly before they drop again, Fairweather cautioned.

What’s the best approach to refinancing?

Consult with a professional. Let a mortgage broker or financial advisor calculate the numbers for you and help decide whether it’s wise to refinance now or wait. Always gather multiple quotes instead of accepting the first option. Studies reveal that borrowers who review various offers can save thousands.

When searching for quotes, cast a wide net. Seek offers from any financial institutions you’re already familiar with, as well as various types of lenders: banks, non-banks, and credit unions. There may be mortgage options available that simplify the process compared to your original loan; for instance, Rocket claims a faster closing process than typical industry timelines.

What about cash-out refinancing?

“Homeowners currently have unprecedented home equity available to tap into,” remarked Michael Micheletti, chief communications officer at Unlock Technologies. Data from ICE indicates that American homeowners hold approximately $11.5 trillion in tappable equity, meaning the amount they can withdraw while maintaining a 20% equity buffer.

For homeowners looking to consolidate debt, a cash-out refinance can be beneficial, Gidwaney stated. Even if switching from a lower mortgage rate to a slightly higher one, it could still be less expensive than credit card or personal loan rates you may face.

However, if consolidating debt is your aim, Micheletti recommended exploring home equity loans, lines of credit, and equity-sharing agreements from companies like Unlock and Point.