How to Decide if Refinancing Is Right for You

Choosing whether to refinance in 2024 isn’t just about getting the lowest mortgage rate. Your personal finances, timing, current loan status, and long-term goals all matter. Below, you’ll find the practical factors every homeowner should weigh before deciding to refinance.

Comparing Your Current Rate to Today’s Rates

Start by looking at the interest rate on your current loan. Are today’s rates lower than what you have now? Even a small drop can mean meaningful monthly savings. But not all differences are big enough to cover closing costs or justify the hassle.

• Lower rates are appealing, but remember, today’s averages are higher than at any time between 2020–2022.
• Compare how your rate stands against historic mortgage averages.
• Many experts recommend a refinance if you can cut your rate by 1% or more, but even smaller drops may add up, depending on your loan size and how long you plan to stay put.

Recent market shifts show minor rate changes can swing the balance between saving thousands or paying extra over the life of your loan.

Age of Your Current Mortgage

How long you’ve had your existing loan can tip the scales. If you’re in the first years of your mortgage, most of your payments are going to interest, so starting a new loan term can reset your progress.

• If you’re early in your loan, refinancing to a lower rate or a shorter term may speed up your equity growth or total savings.
• If you’re 10+ years into your loan, and you refinance into another 30-year mortgage, you’ll likely pay much more interest over time.
• Consider aiming for a new term that’s as short or shorter than what remains on your current loan to avoid starting over.

Changes in Life or Finances

Major events—job changes, family growth, health issues, or big goals—can all reshape your financial needs.

• If your income has grown, you might opt for a shorter-term mortgage to save on interest.
• If your income has dropped or expenses have gone up, a refi to extend your term could reduce payment strain, even though it may cost more in the long run.
• Life changes often mean a review of risk tolerance; for example, moving from an adjustable-rate mortgage to a fixed-rate loan for more stability.

Consider whether your household needs more monthly flexibility or a quicker path to owning your home outright.

Your Home Equity Position

The amount of equity you have in your home directly affects which loans and rates you can qualify for.

• Most lenders require 20% or more equity for the best deals, though some allow less with mortgage insurance.
• More equity can mean better rates and loan terms, and may even allow you to drop costly insurance payments.

Use an online calculator or contact your lender to estimate your current home equity before making a decision.

Your Future Plans and Time in Your Home

Refinancing only pays off if you stay in your home long enough to recoup the upfront costs. Ask yourself:

• Are you planning to move within the next few years? If so, you may not save enough to cover closing costs.
• The “break-even” point—the time it takes for your monthly savings to outweigh initial fees—is crucial. Try using a refinance calculator or see when refinancing makes sense based on your time horizon.

As a practical rule, if you’ll live in your home beyond the break-even point, you’ll likely benefit financially.

Your Complete Financial Picture

Don’t look at your mortgage in a vacuum. Your bigger financial plan—from retirement timelines to debt goals—should guide your move.

• Weigh refinancing against other money priorities (like paying down higher-interest debt, building emergency savings, or investing).
• Consider future risks, such as needing access to cash or changes in property value.
• Review guides like this on key factors to weigh before refinancing.

Refinancing isn’t a one-size-fits-all move. Balance the numbers with your life goals, timeline, and peace of mind to make the best choice for your household.

Conclusion

Refinancing in 2024 calls for careful review, not just a quick reaction to headlines or rate changes. Homeowners with higher-rate loans still have real opportunities to save, but the benefits are tied to your personal situation and long-term plans. Upfront costs, the age of your loan, and your goals matter as much as the numbers you see online.

Small shifts in mortgage rates can still move the needle for many, especially for those who bought at recent highs. Before acting, take time to run the math, weigh all costs, and consider how a new loan fits into your financial future.

If you’re thinking about refinancing, look at your goals and timeline first. Make sure the savings or cash-out aligns with what you truly need. The right move is the one that fits your budget and gives you peace of mind.

Thank you for reading. Share your experience or questions about refinancing as others may benefit from your insights. Watch for future updates on changing rates and new strategies to help protect your home and finances.