Is Mortgage Refinancing in 2025 the Right Move for You?
The mortgage industry has had a volatile year, and homeowners are left wondering whether 2025 will present the right opportunity to refinance. Mortgage rates have fluctuated significantly, influenced by economic trends, inflation, and Federal Reserve policy decisions. While some homeowners could benefit from refinancing in the coming year, others may find that the numbers just don’t add up.
Who Benefits the Most from Refinancing?
If you secured a mortgage when interest rates were above 7%, refinancing could provide significant savings. Experts agree that homeowners with high-interest loans should explore whether switching to a lower rate or a shorter loan term makes financial sense.
Ryan Leahy, a mortgage broker at More Seller Financing, points out that refinancing isn’t just about lowering rates—it should align with financial goals. “Shortening a mortgage term from 30 to 15 years can help homeowners build equity faster, while extending the term can reduce monthly payments and provide financial relief,” he explains.
Additionally, homeowners who have built substantial equity due to rising property values may benefit from refinancing. “Refinancing in 2025 could allow homeowners to leverage this equity for home improvements, debt consolidation, or other financial goals,” says Leahy.
Why Refinancing Might Not Be Worth It
On the other hand, refinancing won’t make sense for everyone. Jeff Lichtenstein, owner of Echo Fine Properties, cautions that for many homeowners, the potential savings may not outweigh the costs.
“Rates don’t appear likely to dip below 6% by the end of the year, meaning refinancing costs could outweigh any long-term benefits,” Lichtenstein says. Homeowners with rates below 7% may see minimal savings, and for those planning to sell within the next five to seven years, refinancing may not allow enough time to recoup closing costs.
A crucial factor in determining whether to refinance is the break-even analysis—calculating how long it will take for monthly savings to outweigh the upfront refinancing costs. Homeowners should carefully analyze their financial situation before committing.
How Mortgage Rates Moved in 2024
The past year was a rollercoaster for mortgage rates. In early January, the average 30-year mortgage rate was 6.62%, according to Freddie Mac. By May, rates climbed to a high of 7.22%, driven by inflation concerns and Federal Reserve policies.
Over the summer, rates briefly dipped to 6.07% in anticipation of Fed rate cuts but climbed back to 6.60% by year’s end. While many economists predict further Federal Reserve rate cuts, mortgage rates don’t always move in lockstep with Fed decisions.
Your refinance rate will also depend on factors such as:
- Credit score – Higher scores lead to better interest rates.
- Loan type – Fixed-rate vs. adjustable-rate loans impact refinancing opportunities.
- Equity and home value – More equity may allow better loan terms.
- Location and lender competition – Regional market conditions influence available rates.
Will 2025 Be the Right Year to Refinance?
The answer depends on your individual financial situation. Aaron Cirksena, CEO of MDRN Capital, emphasizes that homeowners should run the numbers before making a decision.
“If rates drop significantly, refinancing could be a smart move for anyone with a higher-rate mortgage. But if rates remain flat or rise, refinancing may only make sense for those tapping into home equity or consolidating debt,” he says.
At the end of the day, there is no universal answer. Homeowners should consider their long-term financial goals, current interest rate, and expected time in their home before deciding whether to refinance in 2025.