Refinance Activity Has More Than Doubled. Is Now the Right Time for You?
If you locked in a mortgage rate above 7% in 2023 or early 2024, you have probably been watching rates drop with a mix of hope and frustration. When is it actually worth refinancing? How do you know if the savings are real?
The good news is that for a growing number of homeowners, the math is finally working. Refinance applications have more than doubled year over year, and there is a good reason for it.
Why Refinancing Is Surging
The 30-year fixed rate has dropped from its peak above 7.5% to just over 6%. That difference of roughly 1.5 percentage points is enough to generate significant monthly savings for anyone who borrowed during the rate peak.
On a $350,000 loan, the difference between a 7.5% rate and a 6% rate is about $350 per month. That is $4,200 per year back in your pocket. Over the life of the loan, the total savings can exceed $125,000.
For borrowers who took out loans at 7% or above, the opportunity is clear. And with rates potentially stabilizing or declining further, many homeowners are choosing to act now rather than gamble on future movements.
The Break-Even Calculation
Refinancing is not free. You will typically pay closing costs of 2% to 3% of the loan amount, which on a $350,000 mortgage works out to roughly $7,000 to $10,500.
The key question is how quickly your monthly savings recoup those costs. This is called the break-even point. If your refinance saves you $350 per month and your closing costs are $8,400, you break even in 24 months. After that, every dollar saved is pure benefit.
As a general rule, if your break-even point is under two years and you plan to stay in the home for at least three to five more years, refinancing is almost certainly worth it.
When Refinancing Makes Less Sense
Not every homeowner should rush to refinance. If your current rate is already below 6%, the savings from today's rates will be minimal or nonexistent. If you plan to sell your home within the next year or two, you may not recoup the closing costs before you move.
It is also worth considering how far along you are in your current loan. If you are 10 years into a 30-year mortgage and you refinance into a new 30-year term, you are resetting the clock and will pay more interest over time, even at a lower rate. In that case, a 15-year or 20-year refinance might make more sense, as it keeps you on a similar payoff timeline while still lowering your rate.
Cash-Out Refinancing Is Also on the Table
With home values up significantly over the past five years, many homeowners are sitting on substantial equity. A cash-out refinance lets you tap into that equity while also potentially lowering your rate. Homeowners are using these funds for renovations, debt consolidation, college tuition, or other major expenses.
Just be thoughtful about this option. Borrowing against your home increases your loan balance and extends your repayment, so it should be done with a clear purpose and a plan.
The Bottom Line
If you are paying a rate above 6.5%, this is worth a serious look. The savings are real, and the process is simpler than most people expect.
Want to see what a refinance would look like for your specific situation? Reach out and we can run a quick analysis together. No commitment, just clarity.