1. Interest rates are at record lows

First, it would be irresponsible to talk about refinancing without mentioning the current mortgage refinance rates. Interest rates have been largely moving in a downward trend for the better part of 2020 since the start of the pandemic and they have now reached historic lows. As of publication, Freddie Mac holds the average rate on the following:

If the rate on your current mortgage is more than half a point higher than the interest rates listed, it's probably a good idea to consider a mortgage refi. Remember different mortgage lenders may offer you different rates.

When you're considering the process of refinancing your mortgage, it's important to shop around. You can visit an online marketplace like Credible to get a sense of your refinancing options. You can also use Credible to get connected with an experienced loan officer who can answer any questions that you may have about the process.

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2. The “adverse market” fee goes into effect soon

As a result of the rush to refinance that occurred in response to these record interest rates, the Federal Housing Finance Agency (FHFA) recently announced that a new “adverse market” fee will soon be added to any refinances that involve Fannie Mae or Freddie Mac.

Though loan balances under $125,000 are currently exempt, all other mortgages that will eventually be sold to the two government-sponsored enterprises will be subject to a fee that is equivalent to 0.5% of the loan balance. On a $250,000 loan, for example, this fee would be equivalent to $1,250.

Since about half of the mortgage loans originated in the United States are eventually bought by either Fannie Mae or Freddie Mac, this fee has the potential to affect a lot of borrowers. However, the good news is that there is still time to take advantage of today's low mortgage refinance rates without having to account for this fee being added to your closing costs. While the fee was originally supposed to be implemented on September 1, 2020, the agency ultimately decided to delay its implementation until December 1, 2020, amid an industry backlash.

With that in mind, the window of time between now and when the fee goes into effect is quickly closing. If you do want to save on mortgage payments without having to account for this fee, it's likely best to talk to a lender sooner rather than later. Many banks and financial institutions are already starting to add this fee to their loan estimates.

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3. Refinancing makes sense for you

Lastly, it's important to remember that the decision to refinance your mortgage is not just about jumping at the chance to capitalize on low-interest rates. Current refinance rates aside, you also need to take the time to make sure that refinancing makes sense for you personally.

In order to make that decision, one factor that you need to consider is how long you intend to stay in the home. Remember, refinancing comes with an upfront cost and it will take you a while to break even on that cost with the savings that you receive from your mortgage refi rate. Essentially, it’s important to make sure that you intend to stay in the home long enough to see significant savings.

While you can find your own break-even point by dividing the total upfront cost of closing on a new loan by any savings you’ll receive monthly, one study found that it takes homeowners an average of four years to break even on the cost of taking on a new home loan. To that end, if today's low rates are calling your name, make sure you take your break-even point into account before making your decision.

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