How to Refinance in a Volatile Housing Market – Carrington

The past few years have been historic for the housing market. We’ve seen the interest rate on a 30-year fixed-rate mortgage drop to a record low of 2.68% in late 2020 and rise as high as 7.80% in late 2023. This volatility in interest rates alongside the increase in remote work, desire for more space, and boost in spending power early in the pandemic has led to an unparalleled jump in home values and homeowner equity. Although refinancing was an easy choice for many when rates were low, it’s not so clear what homeowners should do to make the most of their higher-valued home equity now. With rates as high as they are, many homeowners are wondering: Is now a good time to refinance?

Your decision to refinance should always be driven by your financial goals, financial situation, and the current mortgage rates. Here at Carrington, we want to give you options that help you make the most of your hard-earned home equity. Let’s explore the moves some homeowners are making in this interest rate environment and why one of those might be right for you.

And, as always, we're here at 888-608-5534 (Monday–Friday, 11AM–9PM ET) to discuss your options. Or, start your application now!

Save Now and Act Later

Option	Why?	Pros	Cons
Refinance to a 30-year fixed-rate loan	Reduce your monthly payments, and then refinance again when interest rates drop	Lower your monthly payment Have more liquidity month-to-month	Extends the lifetime of your mortgage Closing costs on the refinanced amount
Refinance to an Adjustable Rate Mortgage (ARM)	Get a lower interest rate during the fixed period and refinance to a fixed term when rates drop	Get a lower interest rate	Interest rates increase after the fixed period Closing costs on the refinanced amount

Play the Long Game

Option	Why?	Pros	Cons
Refinance to a 15-year fixed rate loan	Reduce your lifetime interest while building equity in your home more quickly	Less interest paid over the life of the loan Build home equity faster Lower interest rates than 30-year fixed rate loans	Increased monthly payments Closing costs on the refinanced amount
Refinance to a lower interest rate based on market conditions or with points	Reduce the interest you pay on your loan	Get a lower interest rate and pay less overall interest	May have to pay for discount points Closing costs on the refinanced amount
Cash-out refinance	Allows you to use the home equity you’ve built up for expenses like renovations or debt consolidation	Lower interest rates Multiple loan types Lump sum of cash at closing	Typically extends the lifetime of your mortgage Closing costs on the refinanced amount

Are you able to refinance?

With these short and long-term goals in mind, it’s important to make sure that you’re eligible to refinance. Some of the requirements include, but are not limited to:

A higher credit score (usually 620 or above)
At least 20% equity in your home (to avoid paying PMI)
A lower debt-to-income ratio (usually 43% or lower)

How expensive is it to refinance my loan?

The cost to refinance your loan depends on many factors. Generally, you should expect to pay around 2-5% of your loan’s total value when you decide to refinance. Some fees that you will have to pay include, but are not limited to:

Application fees
Appraisal fees
Attorney’s fees
Title and insurance fees

As a digital-first lender, we make the refinancing process quick and simple for you—especially if we already service your mortgage. You can apply online now, or connect with us by emailing loans@carringtonvm.com or calling our toll-free number: 888-608-5534 (Monday–Friday, 11AM–9PM ET).

Save Now and Act Later

Play the Long Game

Are you able to refinance?

How expensive is it to refinance my loan?

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