Should You Refinance in 2025?

susiebraskett
Jul 2
2 min read

Refinancing your mortgage can be a powerful financial move—if the timing is right. In past years, homeowners rushed to refinance to lock in ultra-low rates. But in 2025, with interest rates still hovering around 6.5%–7%, the decision isn’t quite as simple.

So, should you refinance this year? Let’s break it down.

What Is Mortgage Refinancing?

Refinancing means replacing your current mortgage with a new one—often to:

Lower your interest rate
Reduce your monthly payment
Change your loan term (e.g. 30 years to 15)
Switch from adjustable to fixed-rate
Tap into home equity (cash-out refinance)

When Does Refinancing Make Sense in 2025?

Despite higher rates, refinancing can still make sense in the following situations:

1. You Have a High-Interest Loan (Above 8%)

If you bought your home when rates were higher (or used an alternative loan product), refinancing to today’s 6.5%–7% may still save you money over time.

2. You Want to Refinance an ARM Before It Adjusts

If you currently have an adjustable-rate mortgage (ARM), now may be the time to lock into a fixed rate before it adjusts even higher.

3. You Need to Lower Monthly Payments

Stretching your loan back to a 30-year term could ease your monthly burden, even if the interest rate isn’t dramatically better.

Just remember: this could increase total interest paid over time.

4. You Want to Consolidate Debt

Cash-out refinancing lets you pull equity from your home and use it to pay off high-interest credit cards or personal loans, often at a lower rate—even in today’s environment.

5. You Want to Tap Equity for Renovations

Home equity has surged in the past few years. A cash-out refi may be worth considering if you're remodeling or investing in another property.

When Refinancing Might Not Be a Good Idea

You already have a rate below 4%
You plan to move or sell in the next 3–5 years
Closing costs would cancel out your savings
You’re near the end of your loan term
You’re trying to pull equity from a cooling market

What About a Cash-Out Refinance in 2025?

A cash-out refinance can still be a smart tool—but in 2025, you need to weigh it carefully.

Ask:

Is the new rate higher than your current mortgage?
Can you use the cash for something that will increase value (like renovations or investment)?
Are you OK increasing your loan balance?

How to Decide: 3 Simple Questions

Will you save money monthly and long-term?
Will you stay in the home long enough to recoup closing costs?
Are you trading short-term relief for long-term debt?

If the answer to at least two is yes, refinancing may be worth exploring.

Pro Tip: Use a Refinance Calculator

Tools like Bankrate or NerdWallet offer calculators to compare your current loan vs. new terms. Or talk to a trusted lender who can run the numbers for you.