When to Refinance Your Mortgage

Mortgage rates have begun ticking down and are expected to fall further in the years ahead, so now’s a good time to consider when to refinance your mortgage.

Animated woman with a home, calculator, percentage mark deciding if she should buy mortgage points, refinance mortgage

Higher inventory levels, less competition for homes and more bargaining power for buyers are all helping make this more of a buyer’s market than we’ve seen in years.

But with rates at lofty levels, I’m looking down the road to when I can refinance my mortgage rate to a lower number.

And, if you’ve recently bought a home, you may be wondering when to refinance your mortgage as well.

Economists are predicting mortgage rates will be in the 5.79%-6.4% range in 2026, and as low as 5% in 2027.

Personally, I’m thinking it will probably be a couple of years before I refinance my mortgage.

Free Report: 5 Best Stocks to Buy in April

Cabot Wealth Network’s expert analysts just revealed their 5 Best Stocks for April. Carefully selected for their combination of strong technical indicators and solid fundamentals, each one has the potential to go much higher in the coming weeks. Don’t miss out!

Get Your Free Copy

But having said that, as you can see from the following chart for a $300,000 mortgage, even a small drop in the interest rate can make a difference in your monthly payment.

Mortgage Rate	Monthly Mortgage Payment (principal and interest)
6.15%	$1,828
6.29%	$1,855
6.36%	$1,869
6.65%	$1,926
6.75%	$1,946

Source: Freddiemac.com

In addition to rates, there are a few other reasons that you may want to refinance your mortgage...

3 Reasons to Refinance Your Mortgage (Other Than Rates)

Moving from an ARM to a fixed loan will make your outflows steadier and less expensive.

Going from a 30-year to a 15-year loan so that you can build equity faster. However, unless the rate differential is great, it may make more sense to just increase your monthly principal payment so you can pay off your loan sooner and avoid refinancing costs.

Taking cash out. If you have significant equity in your home and need the money for something important—such as education or home improvements—refinancing may make sense.

The traditional thought was that refinancing was worth it if you:

Could reduce your mortgage rate by 2%, and …
Plan to stay in your home for five more years.

I personally think that still makes sense, for the most part, if you are refinancing strictly because of rates, but it never hurts to do the calculation to see just how much you can save. For instance, if rates fell to 5.5%, the above mortgage would fall to $1,703—no small bit of change!

But it’s important to know that refinancing your mortgage is usually not free. The cost is generally 3%-6% of your loan amount, and may include these items:

Government recording costs
Appraisal fees
Credit report fees
Lender origination fees
Title services
Tax service fees
Survey fees
Attorney fees
Underwriting fees

You may find this refinancing costs calculator helpful.

To ensure that refinancing makes sense, add up the total costs of the refinance, then divide it by your potential monthly savings, as you see in the graphic above. That will give you the total number of months it will take until your monthly savings make up for the refinancing costs.

Note that this calculation won’t work for cash-out refinances or if you are refinancing to reduce the term of your loan.

And one last thing: When rates come down, don’t be surprised to see banks offering refinancing with no closing costs. If your lender doesn’t, ask them about it.

Learn from Expert Analyst Nancy Zambell

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. As a lecturer and educator, Nancy has led seminars for individual investors at the National Association of Investors, Investment Expo and the Money Show. She has also taught finance, economics and banking at the college level, and has been quoted extensively in The Wall Street Journal, Investor’s Business Daily, USA Today, and BusinessWeek. Now let her give you the tools and resources, including a monthly magazine, for gaining the peace-of-mind to live comfortably now and in retirement in her Cabot Money Club.

Learn More

Note: This post has been partially excerpted from the latest issue of Cabot Money Club Magazine. To learn more about the state of the housing market, refinancing, borrowing, rennovation, and more, join Cabot Money Club today.

Nancy Zambell

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with MoneyShow.com for many years as an editor and interviewer for their on-site video studios.