What Is The Best Spread To Refinance Your Mortgage?

• December 9th 2024

by UrbanTurf Staff

✉️ Want to forward this article? Click here.

Refinancing a mortgage can be a financially savvy move, allowing homeowners to take advantage of lower interest rates or better loan terms. One of the critical factors in determining whether refinancing is a wise decision is the spread between your current mortgage rate and the prevailing market rate. This article will take a look at what the ideal spread is to move forward with refinancing. 

---

The spread represents the gap between the interest rate on your existing mortgage and the current prevailing mortgage rates available in the market. When considering refinancing, homeowners aim to secure a new loan at a rate lower than their current mortgage rate. The difference between the two determines the potential savings and financial advantages of refinancing.

While there is no fixed rule dictating the optimal spread for refinancing, industry professionals often suggest a rule of thumb. A commonly referenced guideline is a 1% to 2% difference between your current mortgage rate and the market rate. For instance, if your current mortgage rate is 7% and the market rate is 6%, the 1% difference might indicate a favorable opportunity for refinancing. 

Determining whether the spread between your current mortgage rate and the prevailing rate justifies refinancing is a multifaceted decision. It involves assessing personal financial goals, evaluating costs, considering the length of time planned in the home, and calculating the break-even point. Consulting with mortgage professionals or financial advisors can assist in making an informed decision. 

This article originally published at https://dc.urbanturf.com/articles/blog/what_is_the_best_spread_to_refinance_your_mortgage/21844.