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Financial expert Dave Ramsey’s Ramsey Solutions published an article in late Dec. that warned against refinancing your mortgage in 2025 unless you’ve considered a number of different things.
Refinancing your mortgage sounds like a great idea, and can definitely save you money over time on the overall cost of your home. The number-one thing to consider, Ramsey Solutions’ writes, is how much will your interest rate go down by refinancing your mortgage? It is hoped that rates drop to 6% or less in 2025 after sitting around 7% throughout 2024.
This might sound like a great thing — especially when you do the math and realize you’ll save potentially thousands of dollars per year — but is there a catch? (RELATED: Do You Think Christmas Is The Best Holiday For Food?)
Always Consider Closing Costs
When refinancing your mortgage, you’ll often incur closing costs with your new lender. These are usually 2-6%, according to Ramsey Solutions. “Multiply the balance of your current mortgage by 0.04 to get a good estimate of what you’ll pay,” states the blog.
You could end up paying upwards of $10,000 or more in closing costs, so make sure the math is mathing for your home. If you won’t save more than your closing costs on the length of your newly refinanced mortgage, is it really worth it?
Probably not. (POPULAR POLL: Do You Like Snow During The Holiday Season?)
“Before moving forward with a mortgage refinance, run these numbers for yourself. There’s no hard and fast rule for “how long is too long” to break even, as long as you’re planning to stay in your house long enough to actually save some money. But if it’s going to take an eternity to get to that point, a refinance probably won’t be worth it,” Ramsey Solutions notes.
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