MW Mortgage rates are falling. Here's how much a typical homeowner can save if they refinance.

By Aarthi Swaminathan

Homeowners with 7% mortgages can save over $100 a month if they refinance, economist says

Mortgage rates are falling, and some homeowners are racing to refinance.

How much can the average homeowner save by refinancing? It depends on where they are starting from.

The 30-year fixed-rate mortgage fell to an average of 6.63% on March 6, the lowest level in three months and the biggest one-week drop since mid-September, according to Freddie Mac (FMCC). A year ago, the 30-year rate averaged 6.88%.

"This decline in rates is already providing some existing homeowners the opportunity to refinance," Sam Khater, chief economist at Freddie Mac, said in a statement. "In fact, the refinance share of market mortgage applications released this week reached nearly 44%, the highest since mid-December."

Who's refinancing?

Falling rates are prompting some homeowners to refinance their mortgage, including those looking to lower their monthly mortgage payments.

About 17.2% of homeowners in the U.S. who have a mortgage have an interest rate of 6% or more, according to an analysis of federal government data by Redfin $(RDFN)$, a real-estate brokerage. That's the highest share on record since 2016.

On a mortgage for a median-priced $400,000 home with a 10% down payment, a drop in rates of even half a percentage point, from 7% to 6.5%, saves the buyer about $120 per month, Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

The vast majority of current homeowners, however, have little reason to refinance their mortgage to obtain a lower rate. About 83% of homeowners with a mortgage have a rate of less than 6%, and 21% have a rate of less than 3%, Redfin said.

Cashing in on home equity

Certain homeowners who are refinancing may be cashing in on the home equity they've built up.

Some homeowners have done cash-out refinances to extract equity from their homes. With a cash-out refinance, they replace the balance on their current mortgage with a bigger loan at prevailing interest rates.

The most common reason borrowers give for doing a cash-out refinance is to pay off other debt such as credit cards and car loans, according to a January report by the Consumer Financial Protection Bureau, a government agency. The report looked at borrowers' behavior between 2014 and 2021.

The second most common reason cited was to finance home repairs or reconstruction.

The typical homeowner has about $313,000 worth of equity in their home, according to data from Intercontinental Exchange. Of that amount, $203,000 could be borrowed against the home while maintaining an equity cushion of 20%.

In the fourth quarter of 2024, cash-out volume rose 25% from a year earlier to a two-year high of $21 billion, ICE said.

-Aarthi Swaminathan

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March 06, 2025 12:12 ET (17:12 GMT)

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