Should I Refinance in 2024?
If you’re a homeowner looking to refinance, 2024 has gotten off to a great start for you! Interest rates are starting to fall again, and with inflation also decreasing and a strong labor market, industry experts cautiously (like really, really cautiously – think meerkats, but in fancy suits) expect rates to continue their slow decline throughout the year.
So, you may be wondering – is now the time to refinance?
Why It’s a Good Idea – for Some Homeowners
A traditional refinance can be great if you bought your home when rates neared their peak: around 8% on a 30-year fixed mortgage at the end of 2023. The difference between a 7% rate and an 8% rate is nearly $170 per month (principal and interest only) on a $250,000 mortgage. That’s already some solid savings, especially if those holiday bills are coming in.
But a refinance is a new mortgage, and like any other loan, requires closing costs that could cancel out those savings for a while. Keep in mind, if you bought a home with Atlantic Bay mid-2022 or later, our Lend It Back program will give you up to $1,000 toward your closing costs when you refinance with us. Ask your Mortgage Banker for details.
Why It Might Be Better to Wait
Although rates are falling, they’re doing it s-l-o-w-l-y, so they still haven’t reached the point where most homeowners can benefit from a refinance just yet. You may want to watch the markets, hoping rates continue declining, so you can nab a better refi and more savings later in the year or beyond.
If you already have a great rate, you may wait even longer. According to real estate firm Redfin, most homeowners had a rate below 6% at the end of 2022, and the vast majority enjoyed a rate below 5%. But a year later, Mortgage News Daily’s December 27, 2023 rate survey had lenders’ average 30-year fixed rate at 6.61% - still well above those great 5% rates.
The exception is if you need a cash-out refinance to capitalize on your equity and pay off debt or cover another big expense. In those cases, the monthly savings can offset a higher rate.
Imagine this hypothetical illustration:
Your current mortgage payment is $1,500.
But your total monthly credit card payments are an additional $1,000.
Refinance to a $2,000 monthly payment, pay off that credit card debt, and now you’ve saved $500 a month - even with a higher mortgage payment.
Additionally, a cash-out refi can…
Lower your overall monthly payments. That means fewer bills to keep up with and less chance of late or missed payments.
Improve your credit scores. Less debt can mean better credit scores.
Grow your financial future. With fewer monthly bills, you’ll feel better about your finances now, and later.
Ask your Mortgage Banker to run the numbers for you!
Calculate the Cost First
As we mentioned earlier, refinancing isn't free. You won’t need a down payment, but the closing costs will be from 3-6% of your loan amount. And you’ll need to apply again with your current credit, employment, and income. Your Mortgage Banker would be happy to present you all of your scenarios.
A closing cost worksheet helps you understand the fees you may need to cover at settlement.
Ultimately, the more you lower your monthly mortgage payment, the faster you'll earn back the cost of a refinance through monthly savings. Keep an eye on the markets, and your Mortgage Banker’s contact information in your phone, and the right refinance will be ready for you when you are!