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Key Takeaways
- With 30-year refinance rates at their lowest since March, homeowners paying upper-7% rates or higher could save thousands annually by refinancing now.
- Refinancing usually makes sense if you can secure a rate at least one percentage point lower than your current one.
- Refi rates could still drop, or they could rise again. Either way, industry experts predict only modest declines through next year.
- It’s smart to calculate your break-even point—savings vs. refinance costs. But since you can refinance more than once, waiting for the “perfect” rate isn’t necessary.
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Refinance Rates Hit Lowest Level Since Spring
Mortgage refinance rates have been steadily dropping over the past two weeks, bringing the 30-year refinance average down to its lowest level since March 12. The current 30-year refinance average is 6.90%, down from 7.10% three weeks ago and well below the 2025 peak of 7.32% in May.
When Refinancing Makes Financial Sense
If you’re paying a high-7% or even 8% mortgage rate, it’s understandable to want to refinance as soon as it makes financial sense. However, the decision to refinance hinges on two key considerations: securing a rate that’s sufficiently lower than your current one and factoring in the costs of refinancing from your lender. When both align, refinancing can be a savvy move that will save you money in the long run.
“If you’re refinancing solely to lower your interest rate, aim for at least a 1% reduction,” said Phil Crescenzo Jr., vice president of the Southeast Division at Nation One Mortgage Corporation. “Sometimes there can be enough benefit from reducing the rate by less than 1%, but this is a good buyer goal in most refinances.”
Refinancing isn’t just about securing a lower rate, though. You might consider a “cash-out refinance,” where you access your home’s equity at closing, using the lump sum for debt consolidation, home renovations, or other expenses, Crescenzo said. “Eliminating private mortgage insurance or shortening your mortgage to align with retirement plans are also great reasons to refinance.”
| Mortgage Payment Savings from a 1% Rate Drop | |||||
|---|---|---|---|---|---|
| Rate | $300,000 | $400,000 | $500,000 | $600,000 | |
| Monthly payment at 7.90% rate | 7.90% | $1,817 | $2,544 | $3,271 | $3,997 |
| Monthly payment at 6.90% refi rate | 6.90% | $1,647 | $2,305 | $2,964 | $3,622 |
| Monthly savings | $170 | $239 | $307 | $375 | |
| Annual savings | $2,040 | $2,868 | $3,684 | $4,500 | |
A common way to assess whether refinancing is worth it is to calculate how many months it will take to break even on the refinancing costs. For example, if it will take three years to recoup the costs of refinancing through lower monthly payments, but you plan to move before then, sticking with your original loan might be wiser.
What Experts Predict for Mortgage Rates Through 2026
While today’s refinancing rates are lower than their spring peak, the improvement so far has been moderate, not dramatic. So, if your current mortgage rate is in the mid-7% range, refinancing may not offer enough of a benefit at this time.
“The recent adjustments to rates are helpful, but it may not be enough to get buyers off the fence yet,” said Crescenzo.
However, there’s no guarantee that mortgage rates will continue to fall. Industry forecasts predict only mild improvements through the end of this year, followed by another slight reduction in 2026. This means rates may not be much better a year from now.
It’s also important to remember that you aren’t limited to refinancing just once, so you don’t need to secure the “perfect” rate. If you refinance now and rates drop significantly down the road, you can always refinance again—provided the savings will justify the costs over a reasonable time frame.
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The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2025. Use is subject to the Zillow Terms of Use.
