Mortgage rates are dropping. Should I refinance my mortgage now or wait? (2024)

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  • Mortgage refinance rates are currently at their lowest since spring 2023, and they should keep falling in 2024.
  • If you got your mortgage before 2023, your current rate might still be lower than if you locked in a new rate by refinancing now.
  • If you bought your home when rates peaked, now could be a good time to refinance — but you may want to wait until rates are even lower.

Mortgage rates are dropping. Should I refinance my mortgage now or wait? (1)


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Mortgage rates have officially dropped by over a full percentage point from when they peaked in October, leading some borrowers to start wondering: Is it finally time to refinance my mortgage?

Average 30-year mortgage rates are now down well below 7% after initially spiking close to 8% just two months ago.

The difference between a 7% rate and an 8% rate is nearly $140 per month on a $200,000 mortgage. And now that rates are even lower than 7%, borrowers could save even more on their mortgage payments.


But refinancing comes with some downsides and costs, even if it means snagging a much lower rate. So before you start searching for the best mortgage refinance lenders, here's what you need to know about refinancing in the current mortgage rate environment.

Why it's probably not a good time to refinance — yet

While it's true that mortgage rates have come down a lot compared to recent highs, they haven't dropped enough for most homeowners to benefit from a refinance. But they might next year, as most experts believe mortgage rates will go down in 2024.

Why wouldn't it make sense for most borrowers to refinance now? While rates have dropped substantially in recent months, the vast majority of mortgage borrowers are currently paying rates that are even lower.

In fact, almost all homeowners with a mortgage had a rate below 6% as of Q4 2022, and more than 82% had a rate below 5%, according to a Redfin analysis. For comparison, Freddie Mac's average 30-year fixed rate for the third week of December was 6.67%.


But what about those who got their mortgages when rates peaked? In this case, it's possible refinancing could be a smart move if you can afford to do so, but it all comes down to whether the math makes sense for you and your goals.

"The decision to refinance should be based on individual circ*mstances, such as the current interest rate, the remaining term of the loan, and the homeowner's financial goals," says Christy Bunce, president of mortgage lender New American Funding.

You may want to consider whether it makes more sense to wait for rates to drop further, even if you could save by refinancing now. While there's no limit to how often you can refinance a mortgage (though there may be waiting periods in certain cases), refinancing isn't free.

Average refinance closing costs are typically between 3% and 6% of the loan amount. On a $200,000 loan, this means you'd need at least $6,000 to pay for your refinance.


The more you can lower your monthly mortgage payment, the faster you'll earn that money back through your monthly savings. Depending on the rate you're currently paying, you may decide it's worth it to wait a bit to see if rates fall further before refinancing.

Current mortgage refinance rates

If you're thinking about refinancing, pay attention to current mortgage refinance rates and look at forecasts of where experts think rates could go in the coming months.

Right now, refinance rates are the lowest they've been since spring 2023. As they continue to head down, more borrowers who got their mortgages in 2023 will have an opportunity to refinance. But those who got their mortgages earlier than this may need to wait a couple of years before seeing substantial savings by refinancing.

Should I refinance in 2024?

When the timing is right, there are a lot of potential benefits to refinancing.


"When mortgage rates start to drop, homeowners should consider refinancing their mortgage," Bunce says. "Refinancing can potentially lower monthly mortgage payments, reduce the overall interest paid over the life of the loan, or even shorten the loan term."

But will 2024 be the year for that? It's possible, but it depends on when you got your current mortgage. If you got your loan before 2023, you might not see rates drop low enough for refinancing to be worth it in 2024.

But if you closed on your mortgage when rates were near 8%, you might be able to save a lot by refinancing in 2024. And if you have a time-sensitive reason for refinancing, such using money from a cash-out refinance, it might be worth it to refinance now instead of waiting.

According to the latest forecasts from Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors, 30-year rates are expected to fall somewhere between 6.1% and 6.5% in 2024. If you have a rate below 6%, refinancing wouldn't make sense in these conditions.


However, it's important to note that mortgage rates are hard to predict with precision. There's a chance that rates could drop even further than this, especially since the Federal Reserve has indicated it's thinking about cutting the federal funds rate next year. This would likely give even more homeowners an opportunity to refinance.

Plus, rates could drop even further in 2025, giving borrowers even more incentive to wait.

When to refinance a mortgage: Things to consider

"It's important to calculate the potential savings and weigh them against the costs of refinancing, including closing costs and fees," Bunce says. "Additionally, homeowners should consider how long they plan to stay in the home, as it may impact the overall savings from refinancing."

If you're considering refinancing your mortgage, here are a few things to keep in mind:


  • Cost vs. savings. If you spend $5,000 on a refinance to save $100 on your monthly payment, it will take 50 mortgage payments to break even on that refinance, or over four years. That's a long time, but you might decide it's worth it if you plan to stay in the home for at least four more years.
  • How much longer you plan to stay in the home. If you sell your home before you break even on your refinance, you'll have ultimately spent more on the refinance than you saved on your monthly payments.
  • Your credit and finances.Can you qualify for another mortgage right now? If your credit score is worse than when you got your current mortgage, it's possible you might not be able to get a lower rate on a refinance loan. You'll also need to have enough equity in your home; depending on the lender, you may need between 3% to 20% equity in your home to refinance.
  • Your goals.What do you want to achieve with your refinance? Do you want a lower monthly payment, a shorter mortgage term, or to take out equity with a cash-out refinance? All three of these will impact the rate you're able to get. Be clear on what you want to achieve.

Ultimately, deciding when to refinance your mortgage is a personal decision that depends a lot on your own financial situation, including your financial goals and what you stand to gain (and lose) by refinancing.

Mortgage refinance calculator

Use Personal Finance Insider's free mortgage calculator to see what your mortgage payment would look like if you refinanced with today's mortgage rates and your current loan balance.

Be sure to consider your remaining loan term as well, and whether you'd be able to refinance into a similar term or if you'd be "resetting the clock" with a new 30-year term.


Mortgage Calculator



$1,161 Your estimated monthly payment

More details

Total paid


Principal paid


Interest paid


Ways you can save:

  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

Keep in mind that whether a refinance makes sense depends on more than just your monthly payment. Refinancing into a longer term, for example, would mean paying more in interest over the life of the loan. You'll also pay closing costs when you refinance, and how long it takes you to recoup those costs depends on how much you can lower your monthly payment (if that's your goal).

Molly Grace

Mortgage Reporter

Molly Grace is a reporter at Business Insider. She covers mortgage rates, refinance rates, mortgage lender reviews, and homebuying for Personal Finance Insider.Before joining the Insider team, Molly was a blog writer for Rocket Companies, where she wrote educational articles about mortgages, homebuying, and homeownership.You can reach Molly at, or on Twitter @mollythegrace.

Mortgage rates are dropping. Should I refinance my mortgage now or wait? (2024)


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