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Message
What does the mortgage rate decline have to be to benefit refinancing?
Posted on 4/7/25 at 11:37 pm
Posted on 4/7/25 at 11:37 pm
What I mean is where it pays for itself refinancing. You wouldn’t benefit if it fell only .50 from where you originally locked in. I’m in a 30 year fixed mortgage rate and locked in at 6.75%. With the tariff panic, the 10 year treasury yield started to fall a bit and it got me thinking about how low it would have to be to benefit me to refinance. Have to consider closing costs and the other fees that have to be considered when you think how much it has to drop to benefit. Is it 1% lower than the original lock of 6.75% or 2% of that? Not sure I will ever see 4.75% but could see the low 5% range.
8
Posted on 4/8/25 at 12:33 am to shoelessjoe
To refinance it should be at least 2 percent is usually the standard but in my opinion, it depends on how long you have had the mortgage. If you have been making payments for several years then it's not worth refinancing unless it's at least 2 percent or more because you are starting over for nothing unless you are refinancing from a 30 year mortgage to a 15 year. Unless your mortgage payments now are hurting your financially, wait it out a bit longer a see if the rates drop enough to benefit you in refinancing.
Posted on 4/8/25 at 6:18 am to shoelessjoe
Where are rates this week? I know they hung around 6.5-7% for most of Feb/Mar
This post was edited on 4/8/25 at 6:18 am
Posted on 4/8/25 at 6:28 am to shoelessjoe
1% is a good rule of thumb.
But it depends on how much equity you have, are you rolling in closing costs and how long will you stay in the home.
For example, if you save $200 a month by refinancing and plan to stay in home another 3 years, that’s $7,200 saved. Compare that to closing costs.. paid in cash or financed.
But it depends on how much equity you have, are you rolling in closing costs and how long will you stay in the home.
For example, if you save $200 a month by refinancing and plan to stay in home another 3 years, that’s $7,200 saved. Compare that to closing costs.. paid in cash or financed.
Posted on 4/8/25 at 6:39 am to shoelessjoe
There’s some good calculators out there online to help you look at some different models and payback windows if you end up buying points + fees.
I am in a similar boat as you and need to get to low 5’s before it makes sense to refi a property.
I was originally at a 30 year mortgage but been aggressively paying down principal - so I hope to not only get a better rate in the next 24 months but try to refinance it at a shorter 20 year mortgage length instead and be at a similar monthly payment as I am now (with a few years shaved off the backend).
I am in a similar boat as you and need to get to low 5’s before it makes sense to refi a property.
I was originally at a 30 year mortgage but been aggressively paying down principal - so I hope to not only get a better rate in the next 24 months but try to refinance it at a shorter 20 year mortgage length instead and be at a similar monthly payment as I am now (with a few years shaved off the backend).
Posted on 4/8/25 at 7:07 am to shoelessjoe
I think it really depends on the situation and what your goals are to “justify” it.
If using a lower payment as the incentive to impact monthly cash flow, it’s a fairly easy calc. All you’re looking at is the difference in payments.
There will be equity differences over the life of the loan, but how much this matters will depend on your timeline.
If trying to decrease interest paid over the life, maybe payment is not as critical.
Another common consideration is going from a 30 to a 15, even if it increases the payment. What I always felt lacking in various calculators was comparing the refi vs existing at the same payment.
I put together my own spreadsheet and projections to compare based on what I was interested in.
Here’s an example I ran for someone a while back. Haven’t looked at this in a while.
If using a lower payment as the incentive to impact monthly cash flow, it’s a fairly easy calc. All you’re looking at is the difference in payments.
There will be equity differences over the life of the loan, but how much this matters will depend on your timeline.
If trying to decrease interest paid over the life, maybe payment is not as critical.
Another common consideration is going from a 30 to a 15, even if it increases the payment. What I always felt lacking in various calculators was comparing the refi vs existing at the same payment.
I put together my own spreadsheet and projections to compare based on what I was interested in.
Here’s an example I ran for someone a while back. Haven’t looked at this in a while.
Posted on 4/8/25 at 7:08 am to pwejr88
quote:
1% is a good rule of thumb.
that's what I went with. In 2020 went from a 3.8 to a 2.8 and it would take 4-5 years I believe to break even but we aren't going anywhere. so about now it was already worth it
Posted on 4/8/25 at 9:48 am to shoelessjoe
quote:
I’m in a 30 year fixed mortgage rate and locked in at 6.75%.
I'm right there with you.
My mortgage broker told me he would refinance my loan at 1/2 price if the rates dropped, I think it would costs me around $9,000.00.
so where is the % to move on this ?
Current rate 6.7% Principle Balance $281,861.74
Posted on 4/8/25 at 9:50 am to DawgCountry
quote:
that's what I went with. In 2020 went from a 3.8 to a 2.8 and it would take 4-5 years I believe to break even but we aren't going anywhere. so about now it was already worth it
Exactly what I did. Refinance costs rolled into the loan, went from 30 year to 25 year. Kept my monthly payment exactly the same. So I owed nothing, cut 5 years off my loan, kept the same monthly payment.
Posted on 4/8/25 at 10:28 am to shoelessjoe
I would do the math to understand how long it will take to offset the closing costs and compare that with how long you realistically plan to stay in the house. I think that is the biggest consideration.
And if you plan to stay in the house forever, you want to make sure you aren't saddled with mortgage payments too far into retirement (if at all).
And if you plan to stay in the house forever, you want to make sure you aren't saddled with mortgage payments too far into retirement (if at all).
Posted on 4/8/25 at 10:38 am to Chicken
quote:
And if you plan to stay in the house forever
How many people actually do this?
People are more mobile than ever before.
Posted on 4/8/25 at 11:59 am to Paul Allen
quote:I would imagine a lot of people do this
How many people actually do this?
Posted on 4/8/25 at 12:32 pm to The Torch
Well at 6.7% for $282K you are currently paying like $1575 in interest and if you added 9K to your balance and dropped your rate to 6%, you'd be paying $1455 in interest per month
Posted on 4/8/25 at 2:59 pm to shoelessjoe
Mines at 6.875% and locked in October 2023.
I’m pretty sure we won’t entertain refinancing until it would drop to 5.5%.
I’m hopeful to see low 5’s again in next few years.
When we refinanced our old home in 2021, we had 26 years left. It didn’t go back to 30, it just kept going with the new rate built in.
I’m pretty sure we won’t entertain refinancing until it would drop to 5.5%.
I’m hopeful to see low 5’s again in next few years.
When we refinanced our old home in 2021, we had 26 years left. It didn’t go back to 30, it just kept going with the new rate built in.
Posted on 4/8/25 at 4:11 pm to Chicken
Posted on 4/8/25 at 4:22 pm to Chicken
quote:
I would imagine a lot of people do this
The average is like 7yrs to stay in a home or a home loan
Posted on 4/8/25 at 6:27 pm to Paul Allen
Sounds like those articles are written about the younger generations dealing with current real estate climate. Most baby boomers and Gen X-ers probably stay in their house much longer than 7 years. Especially those that refinanced at low rates in recent decade.
Posted on 4/8/25 at 6:32 pm to UncleLester
quote:
I was originally at a 30 year mortgage but been aggressively paying down principal - so I hope to not only get a better rate in the next 24 months but try to refinance it at a shorter 20 year mortgage length instead and be at a similar monthly payment as I am now (with a few years shaved off the backend).
This is my plan as well. I just came into a little money and put a chunk of it on the principal. My plan is once I refinance at a lower rate, to make the new note and put the left over difference on principal to equal about an extra note or note and a half per year to close on the 30 year time frame.
Posted on 4/8/25 at 6:38 pm to Chicken
quote:
And if you plan to stay in the house forever, you want to make sure you aren't saddled with mortgage payments too far into retirement (if at all
This makes sense. I don’t really care to retire anytime soon. I would like for my wife to retire as soon as we could pay the house off. If I could refinance and use the difference in current note, I would put it on back end as principal payment to cut the mortgage years down
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