Hi everyone. I live in the Denver area and I’m thinking about refinancing my home. We bought the house in May 2024 with a rate of 7.125% and an APR of 7.375%.
I’m currently talking to my lender about getting a new rate of 6.00% with an APR of 6.194%. My concern is that refinancing will cost about $4,000, and I would need 10 months to break even. If interest rates keep falling, as the Fed might lower them by 0.25% each quarter, I might not be worse off than I am now. But if rates stay around this level, I’ll be okay.
I know none of us can predict the future, but I want to make the best decision for myself.
Thanks for your help.
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The Fed doesn’t directly set mortgage rates. Mortgage rates are influenced by the bond market and how it responds to upcoming rate cuts. It’s difficult to predict what will happen in the short term.
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I understand that mortgage rates are influenced by the bond market, not directly set by the Fed, but from my experience as a homeowner, it seems like there’s a symbiotic relationship between the two.
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Bonds went up between yesterday and today, but rates either stayed the same or also increased. 
I want to refinance too, lol.
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It’s a challenge. Trying to find meaning where there seems to be none.
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Yes, the reasoning behind the unexpected rate move was unclear yesterday, or the markets are calling the bluff on the remaining rate cut projections for the year.
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Never pay closing costs out of pocket. Instead, opt for lender credits by accepting a slightly higher interest rate, which will cover 100% of the closing fees. Avoid rolling these fees into your loan.
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Lender credit to cover all the closing costs.
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You’re right in your analysis. Rates are likely to keep decreasing as the Fed continues to ease.
The next administration might pressure the Treasury and the Fed to resume purchasing mortgage bonds. While neither party has explicitly stated this, both are interested in reducing housing costs, which would help lower mortgage rates.
Consider exploring a rate with a larger credit to offset upfront costs. If rates do fall, it could make sense to refinance later.
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Do you have any advice on how to pursue larger credits?
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Simply request a rate that includes a 0.5 or 1.0 point rebate.
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We’re securing a 5% rate with the Navy Federal refinance.
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Which state are you in? What’s the loan-to-value (LTV) ratio?
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Texas. Review Navy Federal rates.
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Many factors influence rates, making it difficult to determine if your quote is favorable. Consider your loan amount and the value of your home. Is it a single-family residence? Additionally, what items are included in the $4,000 closing costs?
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Think about a no-closing-cost refinance, even if the rate is a bit higher than your current one. This approach helps you avoid missing out on potential savings if rates decrease significantly, enabling you to refinance again soon.
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Why would you refinance if you’re getting a higher rate? That’s confusing.
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The rate would still be lower than their current payment, but it would be higher than if they paid the closing costs upfront. They will still save money on their monthly payments and the overall interest, but they won’t need to pay cash upfront or increase their mortgage value.