Mortgage rates are finally taking a dip, and homeowners across America are seizing the opportunity to refinance and lower their monthly payments. With the 30-year fixed-rate mortgage dropping to 6.63%—the lowest level in three months—many are wondering if now is the right time to act.
Who’s Benefiting from the Refinance Boom?
According to Freddie Mac, the mortgage market is already seeing a surge in refinancing applications, hitting their highest level since mid-December. The primary group jumping on this opportunity? Homeowners with mortgage rates above 6%, who stand to save a significant amount by locking in a lower rate.
Redfin data shows that 17.2% of U.S. homeowners currently have mortgage rates of 6% or higher—the highest share since 2016. These homeowners are in the best position to refinance and potentially save hundreds per month. For instance, on a $400,000 home with a 10% down payment, refinancing from 7% to 6.5% can save around $120 per month.
But not everyone is in the market for refinancing. A staggering 83% of homeowners with a mortgage already have rates below 6%, with 21% enjoying rates under 3%. These homeowners, who locked in ultra-low rates during the pandemic, have little incentive to refinance.
Cash-Out Refinancing: Unlocking Home Equity
For some homeowners, refinancing isn’t just about securing a lower rate—it’s about cashing in on home equity. With home values still high, many homeowners are sitting on record amounts of tappable equity.
The average homeowner has about $313,000 in home equity, with $203,000 available to borrow while maintaining a 20% cushion, according to data from Intercontinental Exchange. Many are choosing cash-out refinances to pay off credit card debt, fund home improvements, or invest in other financial priorities.
In fact, cash-out refinancing has surged. In Q4 2024 alone, cash-out volume jumped 25% year-over-year, reaching a two-year high of $21 billion. With inflation still affecting consumer wallets, many are using this strategy to consolidate high-interest debt and free up cash.
Is Now the Right Time to Refinance?
If your mortgage rate is above 6%, now might be the perfect time to refinance and cut down on your monthly payments. However, if you’re one of the many homeowners with a rate below 6%, holding onto your current loan might be the smarter move.
For those considering a cash-out refinance, now is also a great time to tap into home equity—especially for paying down high-interest debt or funding necessary home renovations.
With rates fluctuating and economic uncertainty still in the air, acting sooner rather than later could lock in major savings before rates potentially rise again.
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