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American Focus > Blog > Economy > Want to refinance your mortgage before the end of 2025? Here’s what to do.
Economy

Want to refinance your mortgage before the end of 2025? Here’s what to do.

Last updated: October 6, 2025 11:43 pm
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Want to refinance your mortgage before the end of 2025? Here’s what to do.
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Are you considering refinancing your mortgage before 2025 wraps up? The end of the year could indeed be a beneficial time for refinancing. As colder months set in, homeowners typically take the opportunity to reassess their finances, aiming to secure preferable rates. If you’re contemplating a mortgage refinance ahead of the New Year, now is a favorable moment. However, determining the right timing and knowing what to anticipate can significantly influence whether refinancing your current mortgage genuinely enhances your savings.

In September, the Federal Reserve lowered interest rates by 25 basis points, a move that many had anticipated. With this cut already in place, you might be asking, “Should I hold out for another rate reduction before the year concludes?”

“We recommend taking action if you see an opportunity to save through refinancing, rather than attempting to time the market,” advised Erik Schmitt, a senior executive at Chase Home Lending, during an email interview.

According to Schmitt, refinancing typically makes sense if interest rates fall by 75 basis points. That said, even smaller declines could be beneficial, particularly for homeowners locked into mortgages around the 7% range from 2023. Current data from Freddie Mac indicates that rates for a 30-year fixed mortgage hover in the low-to-mid-6% bracket.

Imagine you secured a $400,000 mortgage at a 30-year fixed rate of 7.25%. Your estimated monthly payment for principal and interest would be about $2,729.

After a couple of years, let’s say your outstanding balance stands at $395,000. If you opt to refinance into a new 30-year fixed mortgage at 6.5%, your monthly payment might drop to roughly $2,497—a $232 monthly savings that accumulates to over $40,000 in interest saved throughout the loan term.

The takeaway? Assess the current mortgage rates against your existing rate and crunch the numbers. If refinancing presents a genuine savings without stretching your finances, it may be time to proceed.

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Timing is also crucial and depends on how long you plan to remain in your home. If the refinancing costs amount to $5,000 post-closing and you save $232 monthly, your break-even point will be around 21 months. If you’re planning to relocate before that time, refinancing may not be worthwhile.

Learn more: 6 cases where refinancing your mortgage is beneficial

Having established that refinancing could be a smart financial move, it’s essential to consider which type of loan to switch to. Experts generally agree that there’s no universal correct answer, although they have insights regarding which options suit particular financial scenarios.

“For those not intending to stay in their homes long and wishing to benefit from the lower interest environment, refinancing to an adjustable-rate mortgage (ARM) might be advantageous,” Schmitt noted.

Starting with a lower initial interest rate compared to a fixed-rate mortgage, an ARM’s rate adjusts according to market conditions. Consequently, if interest rates drop locally over the upcoming years, your ARM could benefit from those decreases as well. This means immediate savings with a lower rate for the initial period, alongside potential future savings should market rates decline.

If substantial savings are your goal or if you’re hesitant about a potential rate increase in the future, experts offer another pathway.

“We notice many homeowners opting for shorter loan terms to secure lower overall interest expenses,” indicated Charles Goodwin, a vice president at Kiavi.

Consider the aforementioned $400,000 mortgage at a 7.25% interest rate, equating to a monthly payment of $2,729. Current Freddie Mac data suggests that the average rate on a 15-year fixed-rate mortgage hovers around the mid-5% level.

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Assuming your remaining balance is $395,000, refinancing to a 15-year term at 5.5% would elevate your monthly payment to $3,227, but this notably lower rate could save you over $360,000 throughout the loan’s lifetime.

In short, use your duration in the home as a compass for selecting the optimal refinancing type in 2025. If you’re settling in for the long haul, a fixed-rate or shorter loan term could result in significant lifetime savings. Alternatively, if you plan to sell or relocate within five years, it may be a wise decision to pursue an ARM and capitalize on the lower rates available.


  • The advantages and disadvantages of refinancing your home



  • Utilizing HELOCs and home equity loans for improvements



  • How to refinance your loan to consolidate debt—should you?

When considering refinances, be aware of the closing costs associated with every mortgage—refinances included. Preparing for these expenses is crucial so you can determine if a refinance is a prudent decision before the year closes.

According to Schmitt, “Closing costs for refinancing typically range from two to six percent of your loan amount.”

These costs can include application fees, origination fees, appraisal fees, and any potential legal fees. Especially if refinancing a larger mortgage, these sums can escalate quickly.

Goodwin stressed the importance of performing the break-even analysis. “Divide your initial costs by your monthly savings to calculate how long it will take for refinancing to pay for itself,” he advised. If it takes five years to recover your costs but your plan is to stay in your home for only three, a refinance might not be your best move in 2025.

Goodwin and Schmitt both noted the option of rolling closing costs into your loan, either by adjusting your principal or accepting a slightly higher interest rate for the lender to cover fees. The best refinance type this year relies on your timeline. If planning to stay for the long term, paying out of pocket might end up saving you more money. Conversely, if you’re planning on moving soon, allowing costs to be added to your mortgage could be more beneficial.

Read more: How a no-closing-cost refinance operates

It’s essential to consider that refinancing in 2025 may not always be your most financially savvy choice. Alternatives like home equity lending may provide a better solution.

“If you’re not looking to adjust your mortgage terms or give up your current favorable rate, a home equity line of credit could be more advantageous than refinancing,” Schmitt pointed out.

A HELOC establishes a revolving credit line based on the equity you’ve built in your home. This can be a smart way to finance home renovations or consolidate high-interest debt, particularly since HELOCs are linked to the prime rate and might decrease if the Fed lowers rates again this year.

If you’re contemplating a cash-out refinance but only need access to a fraction of your home equity, a HELOC might be the smarter route. “A HELOC enables you to withdraw funds without refinancing your entire mortgage, which is particularly beneficial if your existing rate is lower than what’s currently offered,” Goodwin explained.

Before you decide to refinance your entire mortgage this year, evaluate whether you truly need to alter your mortgage terms or merely require cash. If it’s primarily for cash, utilizing a HELOC could keep more funds in your account.

Keep reading: Choosing between a HELOC and a cash-out refinance

Eligibility for refinancing in 2025

Even if your calculations indicate that refinancing makes sense in 2025, qualifying isn’t guaranteed.

Goodwin noted that lending standards have been relatively stable, but refinance lenders are paying close attention to credit ratings, debt-to-income ratios, liquidity, and home equity. “To secure the best conditions, aim for a strong credit score and ideally at least 20% equity,” he added.

How to prepare early? Reduce outstanding debt, refrain from opening new credit accounts, and keep your income records current and organized.

Additionally, Schmitt emphasized the value of consulting a lending expert as a proactive measure. Even if you aren’t ready to submit a refinance application yet, an advisor can guide you on available options and highlight potential challenges.

As winter typically brings a slowdown in home purchases, this period might open up lender capacity for refinancing inquiries. The close of the year also serves as a time to assess your budget for 2026, and if securing lower monthly mortgage payments is a goal, now could be a prime opportunity to refinance. Ultimately, what truly matters is whether the current rates are advantageous for your savings. If so, the season becomes secondary.

Your savings will differ, but the key determinant will be the gap between your existing mortgage rate and the new one. A shift of just half a percentage point could significantly reduce your monthly payment if your loan balance is sufficiently large. To calculate your break-even point—how long it will take for monthly savings to offset the closing costs—it’s essential. After reaching this milestone, any savings accrued beyond it will be pure profit.

If you intend to modify your loan terms, like transitioning from a 30-year to a 15-year mortgage, refinancing holds merit. The interest savings alone can be highly beneficial. Conversely, if all you need is cash for home improvements or debt settlement, a HELOC or home equity loan might prove to be the shrewder choice. This option would allow you to bypass closing costs while retaining your favorable mortgage rates—especially advantageous for those who locked in fantastic rates during the pandemic.

Laura Grace Tarpley edited this article.

How many times can you refinance your home?

Chase launches a limited-time mortgage rate refinance sale [Expired]

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Move fast to take advantage of Chase's mortgage refinance rate sale [Expired]

How much home equity do you need to refinance your mortgage?

How much does it cost to refinance a mortgage?

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