The Fed, Mortgage Rates & Why Refinancing Is Back on the Table
For the first time in years, mortgage rates are trending down. This shift is tied to the Federal Reserve easing monetary policy.
The Fed doesn’t set mortgage rates directly — but when they lower the Federal Funds Rate (the rate banks charge each other overnight), borrowing becomes cheaper across financial markets. Bond yields fall, and mortgage rates often follow.
Lower rates = lower monthly payments and major long-term savings.
For homeowners, this is a window of opportunity.
What Does Refinancing Mean?
Refinancing means replacing your current mortgage with a new one. Homeowners typically refinance to:
• Lower the interest rate — the most common reason; saves money monthly and long-term
• Change the loan term — e.g. switch from 30-year to 15-year to pay off faster
• Move from adjustable to fixed — to gain stability and predictability
• Cash out equity — to fund improvements, consolidate debt, or pay tuition
Should You Refinance? Use the Break-Even Formula
Refinancing isn’t free. You’ll pay closing costs (usually 2–5% of the loan).
Ask: Will my monthly savings exceed my upfront cost — in time?
Formula:
Closing Costs ÷ Monthly Savings = Months to Break Even
Example:
Closing costs = $5,000
Monthly savings = $150
$5,000 ÷ $150 = 33.3 months (just under 3 years)
If you’ll live in the home longer than 3 years, refinancing makes financial sense.
When Refinancing Makes Sense (Especially for Military Families)
✔ Rate drop of at least ~1%
Even 0.5% can be worthwhile on a large loan.
✔ You plan to stay beyond break-even
If a PCS is likely within 2 years, run the numbers before refinancing.
✔ Better credit or more equity now
Improved financial position = better rates and terms.
VA Homeowners Have a Unique Advantage
If you already have a VA loan, the IRRRL (Interest Rate Reduction Refinance Loan) — also known as a VA Streamline — makes refinancing easier and faster:
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Often no appraisal required
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Lower closing costs
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Fees can usually roll into the loan
Designed for quick rate reduction — ideal for military timelines.
Final Word: Don’t Miss the Window
Rates are shifting. Refinancing may put real dollars back in your pocket — but timing is everything.
Before rates swing again, talk to a trusted mortgage professional.
Run your break-even. Review your PCS timeline. And decide with confidence.