Rate Change is in the Air: Time to Consider Your Mortgage Refinance Options

By Amanda Bailey
6 min read

Rate Change is in the Air: Time to Consider Your Mortgage Refinance Options

High interest rates have held would-be home buyers at bay and made it tough for owners ready to pull the trigger on a refinance. But the tide may be turning in the upcoming year. 

When considering the cost to refinance mortgage loans, homeowners factor in the new rate to determine how much they’ll save in the long run. Better interest is why many decide to refinance in the first place. 

Lower rates and a potential market shift are enough to get people excited about new opportunities. Whether you’re a first-time home buyer or an experienced owner, it’s time to consider your options, and you have several if a refinance is part of your long-term plans. 

Let’s take a hard look at the near future of mortgage refinance rates and the different avenues it could open up. 

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Key Takeaways

  • The recent dip in interest rates may give way to further decreases over the next year. 
  • Homeowners who’ve held off on refinancing are now set to make major moves. 
  • While refinancing helps lower your rate, there are other benefits you should consider. 
  • Different mortgage refinance options can meet the needs of a wide range of borrowers. 
  • No-closing-cost refinances offer unique money-saving opportunities for homeowners. 

The Expected Dip in Interest Rates 

There’s been recent movement in rates for 30-year fixed mortgages. They’ve dipped below 7% and are expected to fall to around mid-6% toward the end of the year. Some experts predict rates could keep decreasing into 2025. 

Borrowers and lenders wonder if this is the beginning of a much-anticipated shift or just another false alarm. The reality is that nobody knows when the Federal Reserve will lower rates. Signs point to somewhere between now and the middle of next year, but only time will tell. 

The good news is that rates are still falling on their own. And when the Federal Reserve makes cuts, it’s going to flood the market with buyers and tie up lenders. Higher demand will drive up home prices, but attractive rates will level things out and give buyers the chance they’ve been waiting for. 

The expected dip also means lower mortgage refinance rates for homeowners who’ve waited patiently to save money and start fresh with new loan terms. If you’re in this camp, your options may soon open up—it’s time to start planning. 

Refinancing: It’s More Than Just Better Rates

Homeowners opt to refinance for many reasons. Saving money is the primary motivation for many, but there are other ways a new loan can help you reach your long and short-term goals. It all depends on your situation. 

When you refinance your home, you replace your current mortgage loan with a new one. Depending on the type of loan you opt for, you’ll likely have a new rate and different terms. With these new conditions in place, you can start making moves you couldn’t consider under the old loan. 

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Eliminate Private Mortgage Insurance (PMI)

If you purchased PMI when you got your original mortgage, refinancing can free you of the monthly payments. This is your chance to rethink your budget and focus money elsewhere. 

Keep in mind that once you have 20% equity in your home, you can request the removal of PMI. If you want to say goodbye to PMI payments soon, refinancing gives you that option. However, your mortgage refinance rates must be lower so you can justify paying new closing costs. High interest rates have held would-be home buyers at bay and made it tough for owners ready to pull the trigger on a refinance.

Shorten Your Repayment Period 

If you’re in a 30-year mortgage you can’t stomach anymore, refinancing allows you to slash the term. This is a great way to reach your financial goals or make the life changes you put on the back burner. 

A shorter repayment period offers many benefits:

  • You can build home equity faster. 
  • Paying off your debt sooner frees up disposable income. 
  • You can plan for the retirement you’ve dreamed of.  
  • Loans with shorter repayment terms often have lower rates.
  • You’ll reduce the interest you’ll pay over the lifetime of the loan. 

Refinancing also gives you the chance to switch from an adjustable-rate to a fixed-rate mortgage. This locks in your rate if you’re worried about interest rising down the road. 

Refinancing Loan Options

There are a handful of refinance options on the market. Your motivation and long-term goals will inform which one you opt for. Once mortgage refinance rates dip to where you need them to be, an experienced lender can help you decide what’s best for you. 

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VA Refinance

If you’re an active service member, veteran, or surviving spouse with a current VA home loan, this refinance program can get you on the right track. It offers qualifying borrowers lower rates, shorter loan terms, and doesn’t require a new appraisal. 

You may also opt for a VA cash-out refinance. This allows you to pull from your equity to access quick cash for home renovations or to pay off debt. 

Jumbo Loan Refinance

Do you own a luxury home? A jumbo loan refinance is the best way to lower your rates and shorten the term on a loan amount above the conventional limit. Qualifying guidelines are strict, but if you have a high credit score, plenty of assets, stable employment, and strong equity, you can take advantage of it. 

Cash-Out Refinance 

This is an easy way to get quick cash by tapping into your home equity. A cash-out refinance allows you to borrow more than your mortgage balance. You pay off your current loan and keep the difference. Borrowers use the cash-out refinance option to consolidate debt, fund home improvements, or start investing.  

FHA Refinance

Homeowners with an FHA loan often need a simple way to lower interest and change their loan terms. This program allows you to leverage attractive mortgage refinance rates to regain financial footing. 

FHA refinance loans offer several options. A lender will help determine the approach that best suits your needs. 

A Look at No-Closing-Cost Refinance 

Most refinance options require you to pay closing costs, exactly like you did when you got your original loan. With a no-closing-cost refinance, your closing costs get rolled into the loan principal or interest. 

This program may be right for you if you’re looking to minimize your expenses while taking advantage of the dip in mortgage refinance rates. It’s great because you won’t need to save in preparation for closing costs. 

However, there’s a downside. Because you roll the closing costs into your new mortgage, you’ll have to pay that amount in interest over the lifetime of the loan. This isn’t a big deal if your closing costs aren’t too high or you plan on refinancing again in a few years. 

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Refinance Now and Later

Using a home refinance to your advantage makes sense in a falling-rate environment. It may surprise you, but you can undertake repeat refinances to set yourself up for a sound financial future. 

Once you make six months of payments on your mortgage, you’re eligible for a refinance. This means you can complete a no-cost refinance every six months. This allows you to keep lowering your rate so you can save money each month and over the lifetime of your loan. 

If you plan on doing this, make sure you keep your credit score in good shape. You should maintain stable employment and keep your debt-to-income ratio under control.

Ready to Enjoy Lower Mortgage Refinance Rates?

The Moreira Team can advise you on the best refinance options for your situation. Our team understands the strain high rates have had on homeowners, and we’re ready to help you take advantage of the upcoming dip. 

Start by using our mortgage refinance calculator to find out how much you’ll save.