Is It Time to Refinance? Navigating Mortgages as Rates Shift

Is It Time
to Refinance? Navigating Mortgages as Rates Shift

You may
remember the heady days of 2020 and 2021, when 30-year fixed mortgage rates
plunged below 3 percent. Here in Montgomery County, that meant many homeowners
were pocketing a few hundred extra dollars each month—and, over 30 years,
saving tens of thousands in interest. Fast-forward to April 2025, and the
landscape looks very different: the average 30-year fixed rate sits at about
6.81 percent, more than double those pandemic lows​.

That
dramatic shift leaves two big questions on the table: if your adjustable-rate
mortgage (ARM) has reset into the 7 percent range, might you lock in a lower
fixed rate today? Or, if you’re one of the lucky few still carrying a 3-percent
loan, does replacing it with a fresh mortgage even make sense—or would selling
and rebuying be the smarter play?

The magic
metric to understand is your “breakeven”—how long it takes for the monthly
savings on a refinanced loan to cover your closing costs. Imagine you owe
$250,000 on an ARM that just reset to 7.50 percent. At today’s average of 6.81
percent, refinancing would trim roughly $143 from your interest bill each
month. With closing costs hovering around $3,000, you’d recoup your fees in
about 21 months—just under two years. Stay in the house beyond that point, and
you begin to net positive savings each month.

By contrast,
if you originally locked in at 3.25 percent, you’d be swapping a terrific rate
for one nearly twice as high—which seldom makes financial sense. Those
homeowners often find that selling their current home and purchasing a new one
(thereby securing a fresh term and rate without refinance fees) is the only
practical path to a lower payment.

Of course, a
traditional refinance on a higher-rate loan isn’t the only alternative.
Homeowners looking for occasional access to cash—whether for renovations or
tuition—may consider a home-equity line of credit, which taps existing equity
at a variable spread over prime and charges interest only on what you borrow.
Veterans and FHA borrowers might qualify for streamlined refinance programs
that waive appraisals and much of the paperwork, while some lenders will
structure “no-closing-cost” options by folding fees into your balance or
slightly bumping up the rate.

Beyond rate
math, personal plans play a huge role. If you’re nearing retirement, planning
to move within five years, or simply craving a different floor plan, the payoff
window for refinancing can shrink or vanish altogether. In a red-hot market,
appraisal fees may climb above initial estimates, and don’t overlook the
temporary credit-score dip from the required hard inquiry—particularly if
you’re eyeing other loans or lines of credit in the near term.

In the end,
no single path fits everyone. The first step is gathering your current loan
details—outstanding balance, remaining term and rate—and comparing them to
today’s offers. If a refinance of a high-rate mortgage yields breakeven well
within your expected time under the roof, it can unlock extra cash flow each
month. If not, you’ll at least know you’ve done the homework, and you can
explore whether tapping equity with a HELOC or taking the plunge on a different
home better aligns with your goals.

Whatever
route you choose—rate-and-term refinance, equity line, streamlined program or
selling—the key is clarity. Understanding how long it takes to recoup costs and
matching that against your family’s timeline ensures you make an informed
choice, free of hype or pressure. If you’d like a deeper look at your specific
numbers, our office is happy to walk through the options so you can decide
which mortgage move feels right for your future.

Kent Pendleton, AAMS®

Financial Advisor, RJFS

Pendle Hill Advisors LLC

14375 Liberty St, Ste 109 | Montgomery, TX 77356

T 936-297-8267

Kent.Pendleton@raymondjames.com | www.raymondjames.com/pendlehilladvisors

Securities offered through
Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory
services are offered through Raymond James Financial Services Advisors, Inc.
Pendle Hill Advisors is not registered broker dealers and is independent of
Raymond James Financial Services.

Opinions expressed in the attached article are those of the
author/speaker and are not necessarily those of Raymond James. All opinions are
as of this date and are subject to change without notice. Every investor’s
situation is unique and you should consider your investment goals, risk
tolerance and time horizon before making any investment. The forgoing is not a
recommendation to buy or sell any individual asset or property. The information
contained in this report does not purport to be a complete description of the real
estate, markets, or developments referred to in this material.