Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (2024)

Table of Contents

  • How mortgage refinancing works
  • Two main options for refinancing
  • What to know before refinancing
  • When it makes sense to refinance your mortgage
  • Other reasons to refinance
  • When it doesn’t make sense to refinance your mortgage
  • What to do before refinancing your mortgage
  • How to refinance your home loan
  • 1. Apply for a refinance loan
  • 2. Lock your rate
  • 3. Underwriting starts
  • 4. Close on your new mortgage
  • The bottom line
  • FAQs

Money Mortgages

Article updated on Aug 19, 2024

Refinance demand is finally picking up as mortgage rates get cheaper.

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Katherine Watt

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Katherine Watt is a CNET Money writer focusing on mortgages, home equity and banking. She previously wrote about personal finance for NextAdvisor. Based in New York, Katherine graduated summa cum laude from Colgate University with a bachelor's degree in English literature.

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Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (5)Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (6)

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Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (7)

Katherine Watt

Writer

Katherine Watt is a CNET Money writer focusing on mortgages, home equity and banking. She previously wrote about personal finance for NextAdvisor. Based in New York, Katherine graduated summa cum laude from Colgate University with a bachelor's degree in English literature.

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Edited by

Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (8)

Laura Michelle Davis

Editor

Laura is a professional nitpicker and good-humored troubleshooter with over 10 years of experience in print and digital publishing. Before becoming an editor with CNET, she worked as an English teacher, Spanish medical interpreter, copy editor and proofreader. She is a fearless but flexible defender of both grammar and weightlifting, and firmly believes that technology should serve the people. Her first computer was a Macintosh Plus.

See full bio

CNET staff -- not advertisers, partners or business interests -- determine how we review the products and services we cover. If you buy through our links, we may get paid.

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Table of Contents

  • How mortgage refinancing works
  • Two main options for refinancing
  • What to know before refinancing
  • When it makes sense to refinance your mortgage
  • Other reasons to refinance
  • When it doesn’t make sense to refinance your mortgage
  • What to do before refinancing your mortgage
  • How to refinance your home loan
  • 1. Apply for a refinance loan
  • 2. Lock your rate
  • 3. Underwriting starts
  • 4. Close on your new mortgage
  • The bottom line
  • FAQs
Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (9)

Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (10)

Written by

Katherine Watt

Writer

Read more from Katherine

Katherine Watt is a CNET Money writer focusing on mortgages, home equity and banking. She previously wrote about personal finance for NextAdvisor. Based in New York, Katherine graduated summa cum laude from Colgate University with a bachelor's degree in English literature.

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Mortgage Refinancing Now Makes Sense for Some Homeowners. Here's Why (2024)

FAQs

Does it make sense to refinance a home right now? ›

A general rule of thumb is that it makes financial sense to refinance your mortgage if you can secure a rate that's at least 1% lower than the one you currently have. During the pandemic, mortgage interest rates hit historic lows and a rush of homeowners were able to refinance with lower interest rates.

Which is not a good reason to refinance your mortgage? ›

Key Takeaways

Refinancing to lower your monthly payment is great unless you're spending more money in the long-run. Moving to an adjustable-rate mortgage may not make sense if interest rates are already low by historical standards. It doesn't make sense to refinance if you can't afford the closing costs.

What is the main reason people refinance a home mortgage? ›

One of the best and most common reasons to refinance is to lower your loan's interest rate.

Will 2024 be a good year to refinance? ›

Mortgage rate predictions 2024

The MBA forecast suggests that 30-year mortgage rates will fall to the 6.6% by the end of 2024, while Fannie Mae and NAR predict rates will end the year around 6.7%. However, current mortgage rates are already technically below these levels.

At what point is it not worth it to refinance? ›

Moving into a longer-term loan: If you're already at least halfway through the loan term, it's unlikely you'll save money refinancing. You've already reached the point where more of your payment is going to loan principal than interest; refinancing now means you'll restart the clock and pay more toward interest again.

What's the downside to refinancing? ›

Refinancing allows you to lengthen your loan term if you're having trouble making your payments. The downsides are that you'll be paying off your mortgage longer and you'll pay more in interest over time. However, a longer loan term can make your monthly payments more affordable and free up extra cash.

Is there a con to refinancing? ›

A longer-term loan could result in lower monthly payments, but higher overall costs. For instance, if you have 10 years left to pay on your current loan and you refinance to a 30-year loan, you could end up paying more in interest overall to borrow the money and have 20 extra years of mortgage payments.

How much do interest rates need to drop to refinance? ›

As a rule of thumb, experts often say that it's not usually worth it to refinance unless your interest rate drops by at least 0.5% to 1%. But that may not be true for everyone.

Is it bad to constantly refinance your home? ›

Fortunately, you can refinance as often as it makes financial sense to do so. A mortgage refinance can help you manage your money more effectively as well as lower your interest rate, remove private mortgage insurance or take cash out of your equity.

Why are people refinancing now? ›

Reasons It May Be Worth It To Refinance

A shorter loan term means that you pay it off quicker, build up equity faster and spend less in interest over time. In combination with a lower interest rate, that can further lower the overall cost of your loan.

How many times can you refinance a house? ›

There is no limit on how many times you can refinance your mortgage, although lenders may enforce a waiting period, typically around six months, known as a 'seasoning' requirement.

How much does mortgage refinancing cost? ›

The cost to refinance a mortgage ranges from 2% to 6% of your loan amount, and you can expect to pay less to close on a refinance than on a comparable purchase loan. The exact amount you'll have to pay depends on several factors, including: Your loan size. Your lender.

Will mortgage rates ever be 3% again? ›

Mortgage rate predictions

Experts also don't expect any drastic dips in rates — say to 3% or 4%, as experienced during the height of the COVID-19 pandemic.

What are the interest rates today? ›

Rate (%) as at 08-21-2024
TermOpenClosed
6 months9.75%7.84%
1 year9.65%7.64%
2 years---7.14%
3 years---6.75%
3 more rows

Will mortgage rates drop below 5? ›

Mortgage rates could fall but not below 6%

As a result, he says most forecasts expect mortgage rates to remain above 6% into late 2025. "Two forecasts worth keeping an eye on are from the Mortgage Bankers Association and Fannie Mae," says Cook.

Is there a catch to refinancing a house? ›

You may end up in more debt

You also need to have a clear idea of how you'll use the money you free up when you refinance. This is particularly true if you plan on cashing out your equity.

How long should you wait to refinance a house? ›

You must be on the home title for at least six months for a cash-out refinance (some exceptions apply). Any time for a simple or rate-and-term refinance; after seven months for a streamlined refinance; after 12 months for a cash-out refinance (can vary by lender).

Will home refinance rates go down? ›

Mortgage rates are likely to continue easing over the next few months, and likely end the year around 6.5% and be in the 6-6.5% range throughout 2025,” Sunbury tells Forbes Advisor, anticipating rates making their way down to the 5.5% to 6% range in late of 2025, and then remaining roughly in that range for the longer ...

How do you know if it is the right time to refinance? ›

You may consider refinancing if any of these scenarios apply to you: Mortgage rates are lower than when you closed on your current mortgage. Locking in a lower interest rate will lower your monthly payment. Your financial situation has improved.

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