If you’re thinking about refinancing your mortgage now that rates have softened a bit from the summer peak of 7.94% in July, it’s essential to understand the factors and costs involved. The average refi rate on a 30-year fixed mortgage was 澳洲幸运5官方开奖结果体彩网:6.29% on Friday, and there’s a chance that rate could drop further this year if the Federal Reserve cuts rates again. While the Fed does not directly influence 澳洲幸运5官方开奖结果体彩网:mortgage rates, it can influence wh♕at mortgage lenders charge custo🐲mers. Nonetheless, the actual refinancing rate you get for your mortgage depends on the lenders.

While you may save money with a new mortgage rate, there may be other fees involved in refinancing your mortgage. The big fee? Closing costs, which could eat into your savings for a while. The typical closing cost amount paid during a mortgage refinance is 3% to 6% of the loan amount, often an average of $5,000, according to Freddie Mac.

So, is refinancing worth the cost?

Refinancing Your Mortgage Is Not Free

The process of refinancing your mortgage is almost the same as when you take out a new purchase mortgage but the cost is not the same. The 澳洲幸运5官方开奖结果体彩网:average cost oജf a mortgage refinance depends on your loan amount, interest rate, credit score, income, location, and lender, plus other variable refinancing fees—basically the cost of everything to finalize your mortgage refinance. This totals between 澳洲幸运5官方开奖结果体彩网:3% and 6% of the loan amount and usually comes to an averag🌸🌱e of $5,000 in closing costs.

There may be no-cost mortgage refinance p🥂rograms through certain lenders, which could help you save money. The lender may offer to cover the costs, but you may pay for other fees in order to secure this deal. Some lenders also let you roll your closing costs into your new loan, so that you can pay the fees off over time. Different lenders have different requirements and programs, so it’s smart to shop around before refinancing.

Georgia-based realtor and real estate consultant Shaheedah Hill recommends not 🐻using your current lender to refinance your mortgage.

“Changing your lender and shopping around for oth🅷er lenders can get you🦩 a better rate,” Hill said. 

Try using a 澳洲幸运5官方开奖结果体彩网:mortgage calculator to see what a lower rate could save you on your mortgage. To get an exact rate quote and cost estimate on a mortgage refinance, you’ll need to contact a bank, credit union, or mortgage lender to discuss your options. Compare lenders and then decide if you want to stay with your company or 澳洲幸运5官方开奖结果体彩网:find a new mortgage lender.

Will Refinancing Really Save You Money?

Refinancing may reduce your interest r💜ate if you qualify for a better mortgage rate than what you currently have. Even the sm☂allest .50% reduction in interest rate can create significant savings and improve your financial stability. The reduced interest rate also helps you to build equity faster since more of your monthly payment goes toward the principal instead of the interest. 

For exa🃏mple, let’sꦫ say you have a mortgage balance of $400,000 with a 7.00% interest rate on a 30-year loan. Here’s what you could save every month if you were able to secure a new mortgage rate that is 2 percentage points lower (not including property taxes or home insurance):

Here’s what that same situat𒈔ion could look like on a 15-year fixed-rate mortgage:

Since closing costs are between 3% and 6% of the loan amount, you could pay anywhere between $12,000 and $24,000 in closing costs for this mortgage refinance. With this𝓡 amount in mind, it’s important to calculate your breakeven p꧋oint: when will those closing costs be worth refinancing your mortgage?

To get the breakeven point, divide the total closing costs by monthly savings to see how many months it’ll take to save. Let’s use the 30-year mortgage example above to calculate the breakeven point for closing costs worth $12,0ಞ00:

It would take 23 months of mortgage payments and savings to recoup the $12,000 you spent on closing costs to refinance your mortgage. That’s almost two years. However, in the grand scheme of things, 23 months is nothing compared to the 28 years that you’ll save $514 per mo🐓nth thanks to the lower interest rate.

“Whether it makes sense for you to refinance ultimately comes down to how much you'll pay to refinance and how much you can save on your mortgage payment,” said Hugh Charlie Wang, a loan officer in California. “If you save enough money each month and recoup out-of-pocket expenses relatively quickly, then refinancing may be worth it.”

There’s no guarantee that mortgage rates continue to drop in 2024 or in 2025. Mortgage rates are based on several factors, the biggest one being what lenders decide to charge customers. While that can be influenced by the Federal Reserve’s rate decisions, it’s not the only factor. Plus, there’s no guarantee the Fed will lower rates again this year: Jerome Powell said today that 澳洲幸运5官方开奖结果体彩网:🍸the Fed is in no rush to lowerꦬ rates. So what should you do?

Rates and costs differ by 澳洲幸运5官方开奖结果体彩网:mortgage refinance companies, so ask around and compare fees and rates. Make sure you can get a lower rate (if you can’t, you may want to ask the lender what you can do to be a good candidate for a lower mortgage rate in the future). If you can get a lower rate, how much lower will it be? What will the monthly savings look like? Do you want to refinance to another 30-year loan or a 15-year loan? What do those costs look like? And finally, ask about closing costs and what fees you’ll have to pay to get a lower interest rate through 澳洲幸运5官方开奖结果体彩网:your mortgage refinance.

How We Track Mortgage Rates

The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a 澳洲幸运5官方开奖结果体彩网:loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zill𒁃ow, Inc., 2024. Use is subject to the Zillow Terms of ⛎Use.