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Should I refinance my mortgage or sell my home? Homeowners often grapple with this tough decision, as both options come with excellent benefits and trade-offs.
Refinancing can lower monthly payments or reduce interest rates, providing long-term savings, but it often involves fees, paperwork, and an extended commitment. Selling offers an opportunity to move to a new home, potentially unlock equity, and avoid long-term debt, but it also means facing market uncertainties and dealing with the costs and stresses of relocation.
In such major life decisions with far-reaching financial consequences, it’s important for homeowners to weigh financial benefits, personal goals, and market conditions before making a move.
In this post, we’ll provide expert insights to help you answer this question. We’ll also review the reasons homeowners may opt to refinance, how to compare loan types, and the importance of getting expert advice for your specific situation. But first, let’s take a look at how the 2025 economic climate and housing market may influence your decision.
How might interest rates, inflation, and home prices affect your decision?
To stimulate the economy and avert a potential recession, the Federal Reserve has lowered interest rates twice so far this year. In November, the rate was cut by 25 basis points to a range of 4.50% to 4.75%. This was after the 50-bps cut in September, which dropped the rate from 5.25% to 5.50%.
Despite these efforts, mortgage rates remained stubbornly high in the upper 6% range. In fact, in the final week of October, the average 30-year fixed mortgage spiked to 7%. As of November 27, 2024, it stood at 6.81%.
Refinancing is likely not as beneficial now: What do these numbers mean for you if you’d like to refinance your mortgage? Depending on your current interest rate, they could mean that your monthly payment would go up, or that you end up paying significantly more interest over the life of your loan.
While these rates are not high compared with the 80s, 90s, and even 2000s, if you purchased your home after 2008 (but before 2022) or even refinanced during the period of low interest rates, there’s a good chance you’ve enjoyed a lower rate.
Selling might be profitable, but finding a serious buyer may be hard: So, what if you sell instead? Recent data from the National Association of Realtors (NAR) shows that sales of existing homes are up 2.9% from the previous year, while the median home sales price is up 4% at $407,200, the 16th consecutive month of year-over-year price gains.
More home sales point to strong buyer interest, which may translate to multiple offers on your home. The rising median price is likewise good news, as you may be able to sell your home for a higher price. But even with the high demand and price appreciation, selling may be difficult, as some homebuyers are still sitting on the sidelines, waiting for mortgage rates to drop.
Changes from seller’s market of prior years: In HomeLight’s 2023 End of Year survey of more than 1,000 top agents across the country, 50% said their local market was in a seller’s market, but that was down from 72% in summer 2023 and down from 98% at the start of 2022.
Interestingly, in the 2024 report, only 32% of agents described their market as a seller’s market. Meanwhile, the share of agents who felt they were in a buyer’s market reached 26%, up from 13% at the end of 2023. Most agents (42%) described the market as balanced.
The market is shifting, as we see high housing inventory and more options for buyers. The number of unsold existing homes rose by 19.1% in September 2024 compared to the same month last year. In October, the total number of homes for sale was 29.2% higher than the year before, the highest since 2019.
Given the current market environment that slightly favors buyers, you may face a few challenges selling your home. For one, it could take longer to sell as buyers carefully weigh multiple options. Additionally, buyers are in a stronger position to negotiate, often requesting repairs and concessions.
A top agent can make it happen: To get expert insight into today’s changing market, we spoke to David Lewis, a top real estate agent in the Atlanta, Georgia, suburbs with more than 16 years of experience. While interest rates are making many buyers hesitant, Lewis explains, “A good house in good condition at the right price always sells quickly.”
He recommends choosing an experienced agent and a lender who are up to date on the changing market and knowledgeable on what will make your home desirable to today’s buyers. HomeLight can connect you with a top agent who is well-equipped to navigate a challenging market. It takes just two minutes to find an agent tailored to your needs.
Now that we’ve glimpsed the unique challenges of the 2025 market, it’s time to learn more about your options.
What’s the advantage of getting a new mortgage?
When you refinance your loan, you pay off your existing mortgage and replace it with a new loan with different terms and interest rates. With higher mortgage rates, homeowners are wary about refinancing.
While predicting the trajectory of mortgage rates is challenging due to changing factors like inflation, the job market, and potential reforms in administration policies, experts anticipate that mortgage rates will decline in 2025, settling in the mid-5 % range.
