Should I refinance my mortgage in 2025?
If you got your mortgage in the past couple of years, chances are, you want to refinance to a lower rate. But whether you should refinance depends on more than just rates.
Let’s look at where mortgage rates could be headed and what you should consider when thinking about refinancing in 2025 and beyond.
Will mortgage rates go down further in 2025?
After record lows, Fed rate hikes drove mortgage rates higher beginning in 2022. In October 2023, mortgage rates peaked above 8 percent, but they have since drifted downward, with economic data sending rates below 7 percent in August.
The Fed cut rates at its last three meetings in 2024, lowering the Federal funds rate by a total of 100 basis points. However, since these cuts, rates have gone up, staying above 7 percent on average for January 2025.
Fixed-rate mortgages — the most popular type of home loan — fluctuate with the 10-year Treasury yield. This figure is influenced by many factors, including Fed policy. But since the COVID-19 pandemic, the spread between the 10-year Treasury yield and the 30-year mortgage rate has widened, from an average of 1.7 percent pre-pandemic to around 3 percent a year ago. This spread has since decreased, said Odeta Kushi, deputy chief economist at First American Financial Corporation, in a December 2024 economic indicator survey conducted by Bankrate.
Kushi expects mortgage rates to decline modestly by the end of 2025. “The decline will be in part driven by some narrowing of mortgage rate spread as the Fed’s policy outlook becomes clearer,” she said.
However, inflation and the uncertainty around President Trump’s tariffs, deportations and tax cuts could help keep rates up, says Melissa Cohn, regional vice president at William Raveis Mortgage.
Will the ‘serial refinancer’ make a comeback?
Many borrowers in recent years have settled for a higher mortgage rate, hoping to refinance in the future. If rates trend lower, some might look to refinance more than once. “A lot of homeowners with 7.5 percent to 8 percent mortgage rates now may become serial refinancers if mortgage rates continue to drop over an extended period of time,” says Greg McBride, chief financial analyst for Bankrate.
A refi-and-repeat strategy could work for you, but keep in mind: You’ll pay closing costs every time you refinance, and you can only do it after a “seasoning” period, typically at least six months from the time you closed the original loan.
The state where you live can impact whether you want to refinance more than once, Cohn says. That’s because states levy different fees and taxes when refinancing. “In states where the costs are high, such as New York state, borrowers are less likely to repeatedly refinance,” Cohn says.
When will refinancing save you money?
Our mortgage refinance break-even calculator can help you estimate exactly when you’ll recoup the costs of refinancing. Here’s an example, assuming a borrower with a 30-year fixed-rate loan who decides to do a 30-year refinance after five years. This example also assumes $7,000 in closing costs.
| Loan amount | $303,280 |
|---|---|
| Current mortgage rate | 7.12% |
| Current payment | $2,042 |
| Rate after refinancing | 6.2% |
| New payment | $1,751 |
| Break-even point | 23 months |
| Monthly savings | $292 |
| Note: These monthly payments include loan principal and interest payments, not taxes, insurance or other fees. |
Note that closing costs can vary considerably according to your location, your loan amount and the lender you choose. Lower interest rates may translate to higher fees and vice versa. Always compare multiple offers, examining rates and fees, to make sure you get the best deal.
Is it ever OK to refinance to a higher rate?
The main objective of refinancing is to obtain a lower interest rate and save money.
That doesn’t mean you can’t refinance in times of higher interest rates, however. Some borrowers refinance due to circumstances such as divorce or unexpected bills.
For example, if you have a significant amount of equity in your home, you could do a cash-out refinance, which replaces your current mortgage with a new, bigger one. You receive the difference between your previous mortgage balance and your new one as cash, which you can use to pay for medical bills, home repairs and other expenses.
A cash-out refinance often costs more than a typical refinance, but they’re typically cheaper than other forms of financing, like a credit card or home improvement loan.
Should you refinance in 2025?
If you can save on your monthly payment or need to pull cash out of equity, you may want to consider refinancing in 2025. However, as rates are expected to continue to fall, you might consider waiting for a more favorable rate.
“There are so many more factors that you have to take into consideration other than just, ‘What’s the difference between my rate and what the new rate is?’” Cohn says.
Whether you’re considering refinancing now or waiting to see how far rates drop, here are resources to help you prepare:
