4 Reasons to Refinance Your Mortgage in 2024
If you’ve wondered any time over the past year whether to refinance your mortgage, your time might just be now. 2023 was a rough year for the mortgage world in general, and the refinance market was no exception -- but with the economic climate expected to rapidly change in 2024, experts are recommending that interested homeowners consider their refi options once again.
If you’d like lower monthly payments, you need cash to pay off some debt, or you simply want some extra funds to put towards home improvement projects, here are four reasons to refinance this year:
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Rates are falling (and will continue to)
There’s no way around it -- interest rates last year were astronomical, and that made the prospect of refinancing out of the question for most homeowners. This year, however, rates are already falling, and this trend is expected to continue through the end of the year. With the Federal Reserve reportedly planning to cut rates multiple times this year, interest rates are expected to get as low as 6.1 percent.
If you have an older mortgage with a rate below 6 percent, this still might not appeal to you, but for a lot of homeowners who made their purchase within the last couple of years, this is fantastic news that could lead to significantly lower payments.
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PMI is expensive
If you have a loan with private mortgage insurance (PMI) attached, you know how expensive this add-on can be. One way to potentially escape it? Refinance.
Whether this method will work for you or not depends on the type of mortgage loan you have, as well as the current value of your home. Some homeowners can refinance into a new loan type that does not include PMI (such as FHA or VA loans), while others may be able to get their PMI removed from their current loan if they meet certain loan-to-value ratio requirements. If PMI is included with your current loan, it’s worth speaking to a professional about your options.
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Saving more to keep up with inflation
Along with rising interest rates, we’ve all been dealing with rising inflation over the past couple of years. If you’re looking for ways to save in other parts of life, refinancing into a loan with lower monthly payments and/or a lower interest rate might be an option.
Or, if you have debt you need to pay down quickly, a cash-out refi could be your answer -- with this type of refinance, homeowners borrow a lump-sum of money that is calculated based on the current value of their home and how much equity they have in it. They can then use this money in any way they please, whether that’s paying off debt, paying for a large expense such as school tuition, or even making investments.
In any case, life right now isn’t cheap, and there are certainly homeowners who could really use a refinance this year.
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You’re staying put for a while
Every refinance comes with a breakeven point; with closing costs and fees considered, refinancing does have upfront costs. Your breakeven point is the month in which your refinance finally starts saving you more than it cost to initiate. This could be any number of months down the road -- 36 months is a typical breakeven point, but this varies.
If you plan to stay in your home for at least that amount of time, if not more, then great! A refinance could save you a lot of money down the road. Are you considering moving soon? If so, a refinance might not be the best idea right now.
2024 is looking to be a great year to refinance for many homeowners, particularly those who purchased their homes within the past few years. If any of these reasons to refinance apply to you, keep track of interest rates and start comparing top lenders today so you can get the most out of refinancing.