Is It Time to Refinance Your Mortgage?


The modest drops in rates may make refinancing more attractive to some homeowners, but others are opting to stay on the sidelines. 

CHICAGO – After the federal government’s most recent report on inflation showed signs of stabilizing, homeowners with mortgages at high interest rates are among those hoping the lending market will follow suit.

While it’s too early to tell if and when home loans will become more affordable, even a modest drop in rates can make refinancing an attractive option.

“There’s not enough movement for the general public to be thinking about refinancing right now,” said Nina Gonzalez, vice president of mortgage lending at Guaranteed Rate Affinity, a Chicago-based lender.

Mortgage buyer Freddie Mac reported Thursday that the average rate on a 30-year mortgage was 6.69% for the week ending Jan. 25, slightly up from last week when the average rate reached its lowest since May 2023 at 6.6%. A year ago, the rate averaged 6.13%.

The average rate on a 15-year fixed-rate mortgage rose to 5.96%, an increase from last week when the rate averaged 5.76%. Freddie Mac It was 5.17% a year ago, according to Freddie Mac. But rates are still a far cry from the estimated 3% that held for much of 2020 and 2021.

Nonetheless, Gonzalez said, “I have reached out to every single borrower in the past five years,” alerting them of the potential for a rate drop and encouraging them to review their current loans.

Some consumers have already decided the time is right. Mortgage applications for the week ending Jan. 5 increased 9.9% from the previous week, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Among those applications, 38.3% were for refinancing.

Tiffany Brown, owner and CEO of a trucking company in Schererville, Indiana, is currently refinancing a property she bought in Avalon Park several years ago using a private lender. With a 9.9% interest rate, she intended to renovate and flip the house quickly but decided to turn it into a rental property.

“Since I wasn’t going to sell right away, it didn’t make sense to keep paying at that rate,” she said.

Saving money on the monthly payment is a common reason for refinancing, but a new loan can offer other benefits even if consumers are comfortable with their current terms. A cash-out refinance, for example, gives homeowners a chance to take back a lump sum to take advantage of increased equity. And switching from a 30-year loan to a 15-year or 10-year might be a good option for those nearing retirement or with a specific financial goal, such as becoming debt free, Gonzalez said.

Refinancing also can ease the sticker shock of closing costs. In Illinois, the average closing costs for a refinance is $2,066, compared to $5,929 for a traditional mortgage, according to That’s because refinancing doesn’t require expenses such as a title search or title insurance, or an attorney, Gonzalez said. Municipal charges, such as property transfer fees or tax stamps also do not apply.

A lower rate can mean a significantly lower monthly payment but be careful to include closing costs to determine how long it would take to break-even on a refinance. Typically, a time frame of less than two years is a good rule of thumb, Gonzalez said.

Homeowners with high credit scores may be able to obtain a more favorable interest rate than the market average. Keep in mind, however, that borrowers still must qualify for a refinancing loan as they did with their current mortgage, Gonzalez said. Alternately, those who qualified for Federal Housing Administration loans for their current mortgage may be able to take advantage of the FHA’s program called streamline refinancing, which requires limited credit documentation and underwriting. The Veterans Administration offers a similar process.

Also available are refinancing loans specifically earmarked for home improvements. These are attractive for those planning renovations because they can increase a property’s value at a lower cost than obtaining a personal loan or dipping into a savings account.

Refinancing might not be the best choice for some homeowners that have locked in a low rate. A home equity line of credit, or HELOC, is one alternative to traditional refinancing. A HELOC allows homeowners to access some of the equity they’ve built up without taking out a new mortgage.

“Know your mortgage” is the best advice Gonzalez has for consumers, as well as to work with an experienced lender or mortgage broker. “If it doesn’t work, we will tell you.”

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