Should You Refinance Your Mortgage in 2024? How to Know if it’s Worth It

In 2020, interest rates took a sharp dive as the Federal Reserve sought to stave off economic collapse amid the pandemic. The resulting low rates sparked a surge in real estate transactions, with numerous homebuyers securing 30-year fixed-rate mortgages below 3%. Fast forward to today, the Fed’s efforts to combat inflation have led to a substantial increase in interest rates, affecting many sectors that influence our economy, including mortgages. These rate adjustments helped propel the 30-year fixed mortgage rate from its lowest recorded point of 2.65% in January 2021 to its current range, currently hovering between 7% and 8%. 

Fortunately, if our economy shows clear signs of slowing down, there is a possibility the Federal Reserve may cut interest rates in 2024. If you’re a homeowner who locked in at a record-low mortgage rate, refinancing your mortgage now would be an impractical choice. However, recent homebuyers who made their purchase around the peak rates may discover potential advantages in considering a rate and term refinance in 2024. According to experts, refinancing makes sense if you can reduce your current interest rate by at least 0.75 percentage points. While this might sound like a small difference, it can translate into substantial savings over time including lower monthly payments, paying off the mortgage quicker, and even allowing homeowners to tap into their home equity for other expenses. 

So, if you’re fairly new to homeownership, perhaps you recently bought a townhouse in Alexandria, VA, or a home in Seattle, WA, with mortgage rates beginning to trend downward, you may soon have truly viable options to refinance your high-interest loan for a lower interest rate, keeping more money in your pocket.