Will you be able to refinance your mortgage in 2025? Here’s what experts think.

Article first appeared: https://www.cbsnews.com/news/will-you-be-able-to-refinance-your-mortgage-in-2025-what-experts-think/

The past year has been a whirlwind for the mortgage industry. During the first week in January, the average 30-year mortgage rate was 6.62%, according to data from Freddie Mac. Rates continued to climb throughout the first half of 2024, hitting a weekly high of 7.22% at the start of May.

Rates did drop slightly over the summer in anticipation of the Federal Reserve cutting rates, reaching a low of 6.07% in late September. But now that the year is coming to a close, we’re largely back to where we started, with the average mortgage refinance rates sitting at 6.60%.

However, most economists expect the Federal Reserve to cut rates at least once more in the near future, which means mortgage interest rates could drop even further. But will refinancing be worth it when that happens?

Will mortgage refinancing make sense in 2025?

If you’ve been waiting for the right opportunity to refinance your mortgage, will 2025 be your year? This is a tough question to answer because mortgage refinance interest rates are influenced by much more than just the Federal Reserve.

Your location, inflation and the price of mortgage-backed securities (MBS) all affect the rate you receive on your mortgage refinance loan. Banks and mortgage refinance lenders also consider your credit score, loan type and down payment when evaluating your loan application.

To get a sense of what will happen with mortgage refinancing rates in the coming year, we spoke to three experts who gave us their perspectives on mortgage refinancing.

Yes, you may be able to refinance your mortgage in 2025

Technically, a refinance can always occur, but the question is whether or not your new rate makes refinancing worth it. Refinancing makes the most sense when you can secure a significantly lower mortgage loan interest rate and reduce your monthly payments.

Aaron Cirksena, CEO of MDRN Capital, says that whether or not refinancing makes sense depends on your current interest rates and financial situation.

“If rates drop significantly, it could be a good opportunity for anyone locked into a higher-rate mortgage. But if rates stay flat or even rise, refinancing might only make sense for those who need to tap into home equity or consolidate debt,” Cirksena explains.

Cirksena adds that your credit score, amount of equity in your home, and overall housing market trends will also play a big role in what lenders are willing to offer. “Really, it’s about running the numbers and determining if the savings outweigh the costs.”

Ryan Leahy, a mortgage broker at More Seller Financing, notes that refinancing isn’t just about interest rates — it should also align with your financial goals.

“Shortening a mortgage term, like from 30 years to 15 years, can help homeowners save on interest and build equity faster. Conversely, extending the term could reduce monthly payments, offering financial relief,” Leahy says.

No, you may not be able to refinance your mortgage in 2025

Jeff Lichtenstein, owner of Echo Fine Properties, said that for most people, refinancing may not make that much sense in 2025.

“Rates don’t appear that they will move down below 6% by year’s end, and it will cost more for a little savings than you will get if you are there long term,” Lichtenstein says. For homeowners with interest rates below 7%, Lichtenstein says any savings you’d get from refinancing will likely be negligible.

Another significant consideration when it comes to refinancing is how long you plan to stay in your home. Lichtenstein said that if homeowners plan to move within the next five to seven years, refinancing may not be the best plan.

“If someone intends to sell within a few years, refinancing may not provide enough time to recoup those costs,” Leahy adds.

Leahy also stresses the importance of doing a break-even analysis to determine the true cost of refinancing. The break-even point is the amount of time it takes for your monthly savings to outweigh the mortgage refinancing closing costs.

Who benefits the most from refinancing right now? 

Each of the experts we spoke to agreed that the homeowners who could benefit most from a mortgage refi right now are homeowners with very high mortgage rates. For example, let’s say you took out a mortgage when interest rates were above 7% and want to refinance to a 15-year mortgage, which has an average rate of under 6% currently. In this case, refinancing might make sense, and you wouldn’t need to wait.

Leahy says that it’s also important to consider your home equity growth due to rising property values.

“Many homeowners have seen significant equity growth due to rising property values. Refinancing in 2025 could allow them to leverage this equity for home improvements, debt consolidation, or other financial goals,” he says.

The bottom line

The bottom line is that there’s no one-size-fits-all solution to refinancing your mortgage — it comes down to your current circumstances and financial goals. So, consider your current situation and your goals during the process to determine whether that move could make sense in the new year.