Save over $40,000 by refinancing

Mortgage rates are finally cooling off. And homeowners who bought between 2023 and 2025, when rates were stubbornly high, can save a lot by refinancing — even if it’s just by a half a point. 

In mid-January, mortgage rates dropped by nearly a point compared to the same time last year, hitting a three-year low of 6.06%, Freddie Mac’s Primary Mortgage Market Survey showed. Simultaneously, refinance demand surged 40% for the week, per the Mortgage Bankers Association’s seasonally adjusted index.

You may be wondering how you’d save by refinancing and if it’s worth the hassle – especially if rates keep coming down. While there has been a downward trend, especially in recent weeks, experts predict the rate will remain around 6.0% through the end of the year. 

Instead of waiting for rates to fall below a certain number, do some math to figure out whether refinancing would work for you now. 

Here’s how: 

1. Calculate how much interest you’d pay over the life of the mortgage at your current rate.
2. Then, calculate how much interest you’d pay over the life of the mortgage with the new rate you expect to get. 
3. Subtract an estimate of your expected closing costs, which is typically 2% to 6%, depending on the lender. Be sure to do your research at this step because the costs can vary widely: Some mortgage lenders will roll your closing costs into your new mortgage and some lenders will let you close on a rate-and-term refinance loan without paying anything. 

The traditional rule of thumb is that if you can get a rate that’s 0.50 points to 0.75 points lower, it may be worth it.

As an example, here’s how you’d do that math: In our scenario, the homeowner has a median-priced house, which is $400,500 as of January, according to Realtor.com. They put 10% down and financed the rest with a $360,450 mortgage at 7.0%. Here’s how their payments and total interest would change if they refinance to a 6.5% rate. 

A $360,450 30-year fixed-rate mortgage with a 7.0% rate

• Monthly payment: $2,398.08
• Total interest paid: $502,860.00

A $360,450 30-year fixed-rate mortgage at a 6.5% rate 

• Monthly payment: $2,278.29
• Total interest paid: $459,734.00

With the lower rate, the homeowner pays $119.79 less per month, and $43,126.00 less in interest over the life of the loan. 

Even if closing costs in this scenario are at the higher end of the spectrum at 6%, you’d save more than $20,000 by refinancing.

To be sure, a 0.50% rate refinance is not always worth it. But it’s definitely worth putting pen to paper or speaking to a housing counselor to see if it can help you save each month. 

Figure out whether this strategy is worth it for you with CNBC Select’s mortgage calculator below, and read on for our top picks for refinancing lenders, based on your priorities. 

Why we like it for borrowers looking to refinance: Better offers homebuyers the option to refinance with zero upfront costs. Instead, your closing costs are rolled into your mortgage. This is a great perk if you know you will save significantly monthly and over the life of your loan by refinancing. Make sure to run the numbers to confirm the savings are worth it, including closing costs.

Other benefits: Better offers comparatively low rates and fast closing timelines. 

Drawbacks: Better has no retail locations or a mobile app. 

For borrowers looking to close online: LoanDepot

Why we like it for borrowers looking to refinance: If you want to refinance your home but don’t want to go through the hassle of leaving your home to do so, look into LoanDepot, which allows homeowners to close remotely in states where it’s legal to do so. 

Other benefits: LoanDepot offers a $1,000 on-time closing guarantee. 

Drawbacks: Rate and fee information is not available online, making it difficult to assess the lender at a glance. 

For borrowers who prefer an in-person experience: Chase Bank

Why we like it for borrowers looking to refinance: Chase Bank is the largest bank in the country, with over 4,500 branches nationwide. With Chase, your mortgage will be backed by one of the most reputable financial institutions in the world, and you can easily find someone to talk to in-person. 

Other benefits: Chase Bank offers a rate discount of 0.05% to 1.0% for some existing bank customers with $75,000 or more in a Chase account.

Drawbacks: Homeowners are required to speak with a representative by phone or in person to complete an online application.

At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties and pride ourselves on maintaining high journalistic standards.

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