Mortgage-rate conditions have shifted, with average mortgage rates at 6.58%, much higher than recent years. Neighbors Bank analysis shows refinancing generally requires at least a 0.75 percentage-point drop to be financially beneficial. Potential savings from refinancing vary significantly by state, with New Hampshire showing nearly $3,000 more five-year savings than Louisiana. Refinancing tends to make sense when a substantial rate decline occurs or when refinancing materially improves monthly cash flow. The decision also depends on the remaining term and age of the original loan and on property appreciation, which can change the long-term value of refinancing.
The real estate market dynamics have shifted, challenging the conventional "marry the house, date the rate" approach for homebuyers. With mortgage rates standing at 6.58%, significantly higher than in recent years, experts caution against assuming that any rate decrease justifies refinancing. A Neighbors Bank analysis reveals that substantial rate drops of at least 0.75% are needed for refinancing to be financially beneficial, with varying savings across states.
Key takeaways Substantial rate drop needed: Refinancing may not pay off unless mortgage rates decrease by at least 0.75 percentage points, challenging the belief that any rate drop is a good time to refinance. Varying savings across states: Different states show significant variations in savings after refinancing, with New Hampshire leading with nearly $3,000 more in five-year savings compared to Louisiana.
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