Majority of New Homeowners Expect to Refinance: Should You Plan to Do the Same?
- 1 day ago
- 9 min read
For many people considering buying a home, one number continues to dominate the conversation: the mortgage rate.
That makes sense. Your mortgage interest rate has a major impact on your monthly payment, the amount of home you can comfortably afford, and the total interest you could pay over the life of the loan.
But there is an important part of the homebuying conversation that sometimes gets overlooked:
The mortgage you use to purchase your home today does not necessarily have to be the mortgage you keep for the next 30 years.
In fact, a large percentage of recent homebuyers are already thinking that way.
One recent survey found that 85% of recent homebuyers with a mortgage expect to refinance within the next three years, while 73% indicated that refinancing was part of their plan from the beginning.
That doesn't mean every homeowner will ultimately refinance, nor does it mean buyers should purchase a home today assuming that lower mortgage rates are guaranteed in the future.
But it does demonstrate an important shift in the way many homebuyers are approaching today's housing market.
Instead of waiting indefinitely for the "perfect" mortgage rate, some buyers are purchasing when they find the right home and the payment works for their budget, while keeping open the possibility of refinancing if mortgage rates become more favorable later.
For homebuyers in South Jersey, Philadelphia, and throughout the areas I serve, understanding how that strategy works can help you make a much more informed decision about whether buying a home makes sense right now.
Why Are So Many Recent Homebuyers Planning to Refinance?
The answer largely comes down to the mortgage rate environment we've experienced over the past several years.
Homebuyers who purchased homes when mortgage rates were higher may eventually have an opportunity to lower their borrowing costs if rates decline.
For example, imagine purchasing a home with a 30-year fixed-rate mortgage at today's available rate.
If mortgage rates later fall significantly, you may be able to refinance the remaining balance into a new mortgage with a lower rate.
Depending on the numbers, that could potentially reduce your monthly principal and interest payment and save money over time.
However, there is an important distinction between hoping to refinance and needing to refinance.
A home purchase should ideally make financial sense based on the mortgage payment you have today.
If refinancing becomes beneficial later, that's an opportunity.
It shouldn't be the only reason the home is affordable.
Should You Wait for Mortgage Rates to Drop Before Buying a Home?
This is one of the most common questions I hear from prospective homebuyers.
It's also one of the hardest questions to answer because nobody knows exactly where mortgage rates will be six months, one year, or three years from now.
Mortgage rates are influenced by numerous economic factors, including inflation, employment data, economic growth, Federal Reserve policy expectations, and movements in the bond market.
Even professional economists regularly disagree about the direction and timing of future interest-rate movements.
Waiting for a specific mortgage rate therefore involves a certain amount of risk.
Rates could decline.
They could remain relatively stable.
They could also move higher before eventually declining.
And mortgage rates aren't the only thing that changes while you're waiting.
Home Prices and Competition Matter Too
Suppose you're waiting for mortgage rates to fall before purchasing a home.
If rates decline significantly, you probably won't be the only buyer who notices.
Lower mortgage rates can increase purchasing power and potentially bring additional buyers into the housing market.
More buyers competing for a limited number of homes can create additional competition and potentially put upward pressure on home prices.
That doesn't mean home prices will automatically increase whenever mortgage rates fall. Real estate markets are local, and supply and demand conditions vary considerably.
But it's one reason trying to perfectly time both mortgage rates and home prices can be extremely difficult.
The better question may be:
Does buying the right home make financial sense for me based on today's numbers?
If it does, you can make the purchase based on information you actually know rather than trying to predict a future mortgage market that nobody can guarantee.
What Does It Actually Mean to Refinance a Mortgage?
Refinancing means replacing your existing mortgage with a new mortgage.
The new loan pays off the remaining balance of the original loan, and you begin making payments according to the terms of the new mortgage.
Homeowners refinance for many different reasons.
A lower mortgage interest rate is probably the reason most people immediately think about, but it isn't the only one.
Depending on your financial situation, refinancing may potentially allow you to:
Lower your monthly principal and interest payment
Reduce your mortgage interest rate
Change from one mortgage program to another
Shorten or extend your loan term
Remove mortgage insurance when eligibility requirements are met
Consolidate certain debts through available home equity
Access equity for home improvements or other financial needs
Change from an adjustable-rate mortgage to a fixed-rate mortgage
Whether any of these strategies make sense depends on the individual homeowner.
That's why refinancing should be evaluated based on your actual mortgage and financial goals rather than a general rule about interest rates.
How Much Do Mortgage Rates Need to Drop Before Refinancing Makes Sense?
You may have heard that mortgage rates need to fall by 1% or even 2% before you should refinance.
That's not necessarily true.
There is no universal mortgage-rate reduction that automatically makes refinancing worthwhile.
For one homeowner, a relatively small reduction could generate enough monthly savings to justify refinancing.
Another homeowner might need a much larger rate reduction.
The calculation depends on several factors, including:
Your current mortgage balance
Your existing interest rate
The new interest rate available
Your remaining loan term
The term of the proposed new mortgage
Estimated closing costs
Mortgage insurance
Your credit profile
Your property's current value
How long you expect to own the home
This is why I prefer to actually run the numbers for homeowners rather than simply tell them to wait until mortgage rates fall by some arbitrary percentage.
Understanding the Refinance Break-Even Point
One of the most useful calculations when evaluating a refinance is the break-even point.
Suppose refinancing costs $4,000 and reduces your mortgage payment by $200 per month.
In a simplified example, it would take approximately 20 months of savings to recover that $4,000 cost.
If you're planning to remain in the home for many years, that could potentially make sense.
If you're planning to sell the home six months later, the calculation looks very different.
There are other considerations as well, but this demonstrates why looking only at the new interest rate doesn't tell the whole story.
A good refinance analysis should compare the costs with the expected financial benefit.
What About “Marry the House, Date the Rate”?
You've probably heard this phrase if you've been researching homes or mortgages:
"Marry the house, date the rate."
The basic idea is that you can purchase the home you want now and refinance the mortgage later if rates decline.
There is some logic behind that concept, but I think it needs an important disclaimer.
Never purchase a home you cannot comfortably afford today because you're assuming you'll refinance into a lower payment later.
Mortgage rates are not guaranteed to decline.
Even if rates do decline, refinancing isn't automatic.
You still need to qualify for the new mortgage based on applicable lending requirements at that time.
Your income, credit, debts, property value, employment situation, and other factors could all affect your ability to refinance.
A more responsible version of the strategy is:
Buy the home when the home and payment make sense today. If mortgage rates improve enough later, evaluate whether refinancing can make an already affordable home even more affordable.
That's a very different strategy from depending on a future refinance to make the purchase work.
Your First Mortgage Doesn't Have to Be Your Last Mortgage
One mistake first-time homebuyers sometimes make is viewing their original mortgage as a permanent financial decision.
The house may be a long-term purchase.
The financing doesn't necessarily have to be.
Over the years, homeowners routinely refinance because their financial circumstances or market conditions change.
You might purchase with an FHA loan today and potentially move into conventional financing later.
You might purchase with a 30-year mortgage and eventually refinance into a shorter term.
You might refinance because mortgage rates have fallen.
Or you might eventually decide that keeping your existing mortgage is the better financial decision.
The important thing is to continue reviewing your options as circumstances change.
First-Time Homebuyers Should Focus on More Than the Interest Rate
Mortgage rates matter, but they are only one part of the homebuying equation.
When I work with first-time homebuyers, we also look at factors such as:
Purchase price
Down payment
Estimated closing costs
Property taxes
Homeowners insurance
Mortgage insurance, when applicable
Loan program
Monthly mortgage payment
Available cash after closing
Seller concessions
Potential first-time homebuyer programs
Long-term financial goals
Sometimes changing the structure of the mortgage can have as much impact as focusing exclusively on the interest rate.
That's why getting properly pre-approved and reviewing different mortgage scenarios before making an offer can be so valuable.
Current Homeowners Should Review Their Mortgage Too
The refinance conversation isn't limited to people buying homes today.
If you purchased a home during a period of higher mortgage rates, it may be worth periodically comparing your existing mortgage with current options.
That doesn't mean refinancing every time rates move slightly lower.
Instead, you want to determine whether the potential savings justify the cost and whether the refinance fits your long-term plans.
A homeowner who purchased recently with a relatively high mortgage balance may have a very different break-even calculation than someone who has owned their home for 20 years and has a small remaining balance.
This is why personalized mortgage analysis matters.
Buying a Home in South Jersey
Real estate conditions can vary dramatically from one market to another.
A national headline about home prices or mortgage rates doesn't necessarily tell you what's happening in your specific neighborhood.
For buyers looking for homes in Williamstown, Washington Township, Sewell, Blackwood, Gloucester County, Camden County, and other South Jersey communities, local housing inventory and buyer competition can have a major impact on the decision to buy.
Waiting for mortgage rates to reach a particular number could potentially mean passing up a home that otherwise fits your needs.
On the other hand, rushing into a purchase that doesn't fit your budget simply because you're afraid of missing out isn't a good strategy either.
The goal should be to understand the numbers before making the decision.
Should You Buy a Home in 2026?
There isn't one correct answer for every buyer.
Buying a home may make sense if:
You have stable income, you're financially prepared for the payment and expenses associated with homeownership, you expect to remain in the home long enough for purchasing to make sense, and you find a property that meets your needs at a price you can comfortably afford.
Waiting may make more sense if your finances aren't ready, your employment situation is uncertain, you need additional time to improve your credit or savings, or the available homes simply don't meet your needs.
Mortgage rates should be part of that decision.
They shouldn't necessarily be the entire decision.
Don't Try to Predict the Perfect Mortgage Rate
It's natural to look backward and think about the mortgage rates that were available several years ago.
But yesterday's mortgage rates aren't available today.
Today's homebuyer has to make decisions using today's market.
The good news is that financing can potentially be changed later.
If you purchase a home today and mortgage rates eventually decline enough to make refinancing worthwhile, you can evaluate that opportunity when it arrives.
If rates don't decline, you still want to be comfortable with the mortgage you originally selected.
That's why I believe the best strategy is to build the home purchase around what you can afford now and treat a potential future refinance as an opportunity rather than a promise.
How Mortgage Mike Can Help
Whether you're buying your first home, moving into a larger home, purchasing an investment property, or wondering whether your existing mortgage could benefit from refinancing, the first step should be understanding the actual numbers.
I'll help you compare mortgage programs, estimated payments, down-payment options, closing costs, and different financing scenarios so you can make an informed decision.
And if you're one of the many homeowners who purchased at a higher mortgage rate, we can also review your existing loan and determine what mortgage rate and savings level would potentially make refinancing worthwhile.
You don't have to guess.
We can run the numbers.
Ready to Talk About Your Mortgage Options?
If you're considering buying a home in South Jersey, Philadelphia, or the surrounding area, or you already own a home and want to review your refinance options, contact Mortgage Mike – Michael DeSanto, NMLS #1766709 at CrossCountry Mortgage.
Visit NewHomeApproval.com to get started.
Whether you're ready to purchase now or simply trying to determine what you can comfortably afford, I'm happy to help you understand your options before you make the decision.
This information is for educational purposes and is not a commitment to lend. Loan approval, available programs, interest rates, and terms are subject to qualification and market conditions. Refinancing may result in higher total finance charges over the life of the loan.
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