Is mortgage refinancing worth it now? Here’s what the experts think

Mortgage interest rates have still been trending upward. As of July 6, the average fixed rate on a 30-year mortgage was 6.81% — not seen since October 2002, except for a brief spike in late 2022.

but can A mortgage refinance Still make sense for homeowners, despite current rates? Here’s what mortgage experts have to say.

Check today’s current mortgage refinance rates here.

Why do you want to refinance your mortgage now?

“The same considerations apply to refinancing in today’s market as other market trends. It’s a good idea to refinance when you have a net benefit from doing so,” says Joel Ohman, a certified financial planner and CEO of InsuranceProviders.com.

Ohman adds, “It’s harder to get that leverage when interest rates are high, so fewer people are refinancing now than they were a few years ago. Still, there are some great reasons to refinance.”

Here are some examples of when it still can Finance your mortgage refinancingDespite the high rate.

If you can get a lower rate than you

The mortgage interest rate you get depends on a variety of factors beyond market trends, including the size of your down payment, the type of loan you have, your credit score, and the cost of the home. As a result, a higher average rate nationwide doesn’t necessarily mean you’ll get a higher rate.

“If you’ve improved your credit score since getting your loan, for example, refinancing can help you secure a better interest rate. A higher credit score demonstrates greater creditworthiness to lenders, resulting in more favorable loan terms,” said Adam Garcia, consultant and CEO of Financial Stock Dork.

By getting quotes from several mortgage lenders, you can see if you can get a lower rate.

Compare your refinancing options online now.

If you can drop mortgage insurance and save

Refinancing now may also make sense if doing so allows you to eliminate mortgage insurance.

Private Mortgage Insurance (PMI) It usually costs 0.2% to 2% of your loan amount each year and is required for conventional loans when you put down less than 20%. While you may be able to remove PMI from your existing loan once you reach 22% equity, refinancing requires an appraisal that can result in a new loan without requiring PMI.

“Remember, though, that if your current interest rate is lower than what’s available today, you can continue to pay your PMI,” Ohman says.

Most FHA loans require an annual mortgage insurance premium (MIP) for 11 years or the life of the loan, which costs 0.15% to 0.75% of your loan amount. If you have an FHA loan and at least 22% equity, it may make sense to refinance to a conventional loan and eliminate the MIP if it lowers your overall costs.

If you can refinance into a fixed rate mortgage

“Refinancing can also provide an opportunity to switch from an adjustable-rate mortgage to a fixed-rate mortgage, which provides stability and protection against future interest rate increases,” said Lauren Howard, founder of Prime Plus Mortgage.

Fixed-rate mortgages allow you to lock in your current rate and enjoy predictable monthly payments that won’t fluctuate throughout your term. However, while they can prevent your loan payments from increasing, they can also prevent them from decreasing when rates drop.

Check out current mortgage refinancing offers to see if they’re right for you.

If you have equity you want to cash out

Refinancing your mortgage can be helpful if you have a significant amount owed equity You want to borrow against.

A Cash-out refinancing “Can be beneficial for home improvement, debt consolidation or other financial needs,” says Garcia “If you have multiple high-interest debts, such as credit card debt or personal loans, it may be a wise decision to consolidate them by refinancing.”

“Rescheduling these loans into a single loan with a lower interest rate can make your payments easier and potentially save you money in interest payments,” he adds.

Should you refinance your mortgage now?

you stay or you don’t stay You should refinance your mortgage Now that’s a personal decision that must be made on a case-by-case basis. A good place to start is to get a quote to see what rates and terms are available to you. Don’t forget to note Closing costsWhich runs from 2% to 6% of your loan amount.

From there, compare the offer to your current loan to see if a new loan offers any benefits. If you have any doubts or questions, it can be helpful to run the decision by a reputable financial advisor.