Advertisement

SKIP ADVERTISEMENT

More than four million borrowers could potentially benefit from locking in a lower rate. Here’s what to consider.

The average interest rate for 30-year fixed mortgages was 6.22 percent last week, according to Freddie Mac. Credit...Mario Tama/Getty Images

Nov. 9, 2025, 5:01 a.m. ET

Now that mortgage rates have declined closer to 6 percent, a growing number of homeowners may benefit from refinancing.

But does it make sense for you?

The vast majority of homeowners with mortgages still have more enviable rates in the fives or lower. But at least four million borrowers could potentially shave 0.75 percentage points off their current rate by refinancing at prevailing rates, according to data from ICE Mortgage Technology.

And there are about 1.7 million homeowners who are particularly well positioned: These people have rates of 6.92 percent or higher, credit scores of 720 or more and at least 20 percent of equity in their homes; taken together, that means they can save roughly $334 monthly, on average, by refinancing now.

Here’s what you’ll need to consider.

How Mortgage Rates Work

The average interest rate for 30-year fixed mortgages was 6.22 percent on Thursday, according to Freddie Mac, up slightly from 6.17 percent last week and 6.79 percent a year ago.

After reaching more than 7 percent at the start of the year, rates have generally been on the decline, particularly in the last several weeks, driving the number of refinancings higher.

Mortgage rates do not move in lock step with the Federal Reserve’s changes to the so-called federal funds rates (the rate that banks charge one another for overnight lending), but they are influenced by them. Instead, mortgage rates largely track the yield on 10-year Treasury bonds, which are driven by a variety of factors, including the outlook for inflation, the economy and investor sentiment.

If the outlook for economic growth weakens, longer-term rates, including for mortgages, are likely to decline.

How Refinancing Works

Refinancing involves paying off your existing mortgage and purchasing a new loan. If you refinance from one 30-year loan into another, that will generally yield lower payments, freeing up cash for other spending or savings. But you may end up paying more in interest over time (though making extra payments toward the loan principal can shorten the total term of the loan).

Conversely, a mortgage with a shorter term — say, 15 or 20 years — can result in more interest savings, but your payments will be higher.

Doing the Math

While far more borrowers are refinancing now, some are holding out because they expect rates to drop even further, something that’s entirely plausible but impossible to predict with any certainty.

Refinancing makes sense only if you expect to stay in your home long enough to recoup the closing costs and other fees, which are often a flat $2,500 to $4,000, or perhaps 2 or 3 percent of the loan amount, depending on the mortgage size and your location.

Let’s say it costs $2,500 to refinance, and you’re likely to cut your payments by $250 a month. If you divide $2,500 by $250, that means it will take 10 months to make your money back and start saving.

“While there is no hard and fast rule — simply a personal decision — the general rule of thumb is the payback period should be 36 months or less,” said Kevin Iverson, president of Reed Mortgage, a brokerage in Littleton, Colo.

Then there’s the matter of the monthly cost savings. In years past, the thinking was that you shouldn’t refinance unless you could reduce your rate by at least one percentage point — but that no longer holds.

“This is very old school, as loan amounts have gotten a lot larger over time and one does not necessarily need a one-percentage-point reduction to see a significant savings with a reasonable payback period,” Mr. Iverson added. Smaller loan amounts, however, will need significant rate drops to be worthwhile.

A mortgage refinance calculator like the one on Fannie Mae’s website lets you enter your current payment and a new interest rate for any potential refinanced mortgage to examine the potential savings.

When You’re Uncertain

For people who are afraid of moving ahead because they expect rates to drop further, some lenders are offering what they call a low or no-cost refinancing. You won’t pay nearly as much upfront, but you’ll still pay something — in the form of a slightly higher interest rate. That gives borrowers the option to refinance again should rates become more attractive — and it might be a good option for borrowers who don’t expect to stay in the home long enough to recoup their closing costs.

“A consumer who has short-term goals often chooses the no-cost,” said Erik Johansson, an executive loan officer at Rocket Mortgage in Palatine, Ill.

Finding the Best Rate

Before you begin shopping, check your credit file at each of the three credit reporting companies to ensure there are no inaccuracies. You can get free copies at the website annualcreditreport.com, which is run by the big three.

Start by contacting your loan servicer — they may offer competitive deals in an effort to retain their current customers, brokers said.

But, as laborious as it may be, take the time to shop around. As my colleague Ann Carrns reported this year, contacting different lenders to compare costs can save borrowers many thousands of dollars over the long run.

Tara Siegel Bernard writes about personal finance for The Times, from saving for college to paying for retirement and everything in between.

Advertisement

SKIP ADVERTISEMENT