Want to refinance your mortgage before the end of 2025? The end of the year could actually be an ideal time to refinance. During the colder months, homeowners can hunker down, review their budgets for the upcoming year, and try to lock in better deals. So, if you’re eyeing a mortgage refinance before the New Year, the window is wide open. But knowing when to act and what to expect can make or break whether replacing your current mortgage actually saves you money.

Refinancing your mortgage: Why timing matters

In September, the Federal Reserve cut interest rates by a long-awaited 25 basis points. With one rate cut in the bag, you might be wondering, “Should I wait for another rate cut before year’s end?”

“We advise that if you have an opportunity to save through refinance, take advantage of it rather than attempting to time the market,” Erik Schmitt, consumer direct executive at Chase Home Lending, said in an email interview.

His rule? If rates drop by 75 basis points, refinancing often makes sense. However, smaller drops could make sense — especially for those with mortgages in the 7% range from 2023. Data from Freddie Mac puts current rates on a 30-year fixed-rate mortgage in the low-to-mid-6% range.

Let’s say you took out a $400,000 30-year fixed-rate mortgage at 7.25%. Your monthly principal and interest payment is probably around $2,729.

Now that you’ve owned the home for a couple of years, your outstanding balance is $395,000. If you refinance into another 30-year fixed-rate mortgage with a 6.5% rate, your payment could decrease to around $2,497 — saving $232 per month and over $40,000 in interest over the life of your loan.

Translation? Compare today’s mortgage rates to your current rate and run the numbers. If a refi will save you money without straining your budget, it could be time to act.

When it comes to timing, the amount of time you plan to stay in the home matters too. If the cost of refinancing your mortgage is $5,000 after closing costs, and you save $232 per month, it will take approximately 21 months to break even. If you plan to move in less than 21 months, refinancing probably wouldn’t make sense right now.

Learn more: 6 times when it makes sense to refinance your mortgage

Choosing the right refinance option

Once you’ve decided that refinancing is a solid money-saving move, here’s the next question: What kind of loan should you refinance into? Experts agree there’s no one-size-fits-all answer, though they do have thoughts on which choices make sense for specific financial situations.

“For those who don’t plan on being in their home very long and [are] looking to take advantage of the lower interest rate environment, refinancing into an adjustable-rate mortgage (ARM) could be advantageous,” said Schmitt.

With an ARM, your interest rate typically starts lower than it would with a fixed-rate mortgage. Then, your rate fluctuates based on market rates. Therefore, if local interest rates drop in the next few years, the rate on your ARM may also decrease. This translates to instant savings with the lower rate for the first few years, as well as future savings if market rates decline.

If you’re looking for even more substantial savings or don’t want to risk a rate increase down the road, experts have another option.

“We’re seeing a mix of homeowners using shorter [loan] terms to lock in lower lifetime interest costs,” said Charles Goodwin, a vice president at Kiavi.

Take that $400,000 30-year fixed-rate mortgage we mentioned above, with a 7.25% interest rate and a monthly payment of $2,729. Freddie Mac data has shown the average rate on a 15-year fixed-rate mortgage hovering in the mid-5% range.

Let’s still assume your remaining balance is $395,000, but you refinance into a 15-year term with a 5.5% rate. While reducing your mortgage term to 15 years would increase your monthly payment to $3,227, its drastically lower rate would save you more than $360,000 over the life of your loan.

In other words, use your time horizon as a guide to choose the best type of refinance in 2025. Planning to stay put for decades? A fixed-rate or shorter-term loan could save you thousands in lifetime interest. Expecting to sell or move within five years? Then it could be a good time to get an ARM and take advantage of lower interest rates.

Up Next

• The pros and cons of refinancing your home

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• How to use HELOCs and home equity loans for home improvements

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

What it costs to refinance in 2025

You’ll encounter closing costs with every mortgage — refinances included. It helps to know what kind of costs to expect so you can calculate whether a refi is the right move before year’s end.

“Closing costs for a refinance are usually about two to six percent of your loan amount,” said Schmitt.

Think application and origination fees, your appraisal, and any real estate attorney fees that might apply. Those figures can add up quickly, especially if you’re refinancing a larger mortgage balance.

Goodwin emphasized the importance of doing the break-even math. “Divide your up-front costs by the monthly savings to see how long it takes for refinancing to pay for itself,” he said. If it takes five years to recoup your costs but you only plan to stay in your home for three, you might be better off skipping the refinance in 2025.

Both Goodwin and Schmitt noted that you can roll closing costs into your loan by either adding them to your principal or accepting a slightly higher interest rate in exchange for the lender covering the fees. The right type of home loan refinance in 2025 depends on your time horizon. If you’ll be in the home long term, paying up front often saves more. If not, rolling in the costs might make more sense.

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

Considering HELOCs as alternatives

Here’s the tough love: Refinancing in 2025 might not be a savvy money move for you. If not, home equity lending products could be the solution.

“For those who aren’t looking to change their existing mortgage terms or give up their current rate, a home equity line of credit may make more sense than refinancing,” said Schmitt.

A home equity line of credit (HELOC) creates a rotating credit line based on your current home equity. It can be a smart tool for paying for renovations or consolidating high-interest-rate debt, especially since HELOCS are tied to the prime rate and could get cheaper if the Fed cuts rates again this year.

If you’re considering a cash-out refinance but really only need to access a portion of your home equity, a HELOC may prove the wiser choice. “[A HELOC] lets you access cash without replacing your whole mortgage, which is especially helpful if your current rate is lower than what’s available today,” said Goodwin.

So, before you refinance your entire mortgage this year, ask whether you just need cash or if you also need to change your mortgage terms to get a lower rate or monthly payment. If it’s the former, a HELOC could keep more money in your pocket.

Keep reading: How to choose between a HELOC and a cash-out refinance

Who qualifies for a refi in 2025

Even if the numbers add up for a refinance in 2025 to make sense, qualification isn’t automatic.

Goodwin said qualification standards haven’t shifted much recently, but mortgage refinance lenders remain laser-focused on credit scores, debt-to-income ratios, liquidity, and home equity. “To get the best terms, you’ll want strong credit and ideally 20% or more equity,” he said.

His tips for prepping now? Pay down debt, avoid opening new credit lines, and keep your income documentation organized and up to date.

Schmitt also advised that you talk to a lending professional early. Even if you’re not ready to submit a refi application today, a lending advisor can walk you through options and flag any potential hurdles.

Refinancing your mortgage in 2025: FAQs

Is winter really the best time to refinance?

Winter tends to bring a slowdown in homebuying, which can potentially free up a lender’s pipeline for refinancing applications. The end of the year can also be a good time to prepare your budget for 2026, and if you’re looking for lower monthly mortgage payments next year, refinancing now could be a good idea. What matters more than season, however, is whether today’s rates save you money. If the math works, the weather doesn’t matter.

How much can I save by refinancing my mortgage?

Savings will vary, but the key factor is the difference between your current mortgage rate and the new one. Even half a percentage point can shave hundreds off your monthly payment if your loan balance is large enough. To know for sure, calculate your break-even point — that’s how long it’ll take for your monthly savings to cover the closing costs on your refi. Beyond that point, you’ll enjoy pure savings.

Should I refinance or get a HELOC in 2025?

If you want to change your loan terms, such as switching from a 30-year to a 15-year mortgage, refinancing makes sense. The interest savings alone are a home run. However, if you just need cash for a renovation or debt consolidation, a HELOC or home equity loan might be the smarter option. You’ll avoid closing costs and won’t have to replace your entire mortgage. This is especially beneficial if you already have one of those rock-bottom, pandemic-era mortgage rates.

Laura Grace Tarpley edited this article.