3 Refinancing Moves to Make Before the Next Fed Meeting

If you’ve been considering refinancing your mortgage, now could be the perfect time to act. Mortgage rates have already started to decline, and with the Federal Reserve hinting at further rate cuts, they could drop even more after the upcoming Fed meeting.

This shift in rates presents a valuable opportunity to secure a lower interest rate and reduce your monthly payments. However, it’s important not to wait too long—acting now ensures you don’t miss out on these favorable conditions.

Here’s what you should know if you're thinking about refinancing your mortgage.

Understand Your Current Mortgage Rate

Before you can evaluate whether refinancing is the right move, it's essential to know your current mortgage rate. Many homeowners are uncertain about their exact rate, but having a clear understanding is crucial. Your monthly mortgage statement should show your loan balance and interest rate.

Knowing your rate allows you to compare it to current and future rates, helping you decide if refinancing would benefit you.

Evaluate Potential Savings

Once you know your rate, you can start looking for refinancing opportunities. Even a small drop in rates could result in significant savings, particularly if your mortgage balance is large.

For some, a rate decrease of just a fraction of a percent might justify refinancing, especially if it reduces your monthly payments.

However, the decision to refinance should not be based solely on the interest rate. You'll also need to consider the costs associated with refinancing, such as closing fees, and calculate how long it will take to recoup those expenses. This is known as your breakeven point.

To determine if refinancing is worth it, divide the total cost of refinancing by the monthly savings it would generate. If you plan to stay in your home beyond the breakeven point, refinancing could be a financially sound decision.

Plan for Future Expenses

If rates drop, cash-out refinancing might become more appealing. This option allows you to take out a new mortgage for more than you owe, using the difference for major expenses like home renovations, debt consolidation, or college tuition.

Although cash-out refinance rates are generally higher than rate-and-term refinances, lower overall rates could make this option more affordable.

If you're considering refinancing, now is a good time to start planning. Map out any upcoming big expenses, and consult your local mortgage professional to explore your options and determine the best course of action, ensuring that your refinance aligns with your financial goals.