I Just Got a Mortgage, but I'm Hoping to Refinance in 2024. Here's Why

Getting a mortgage is a huge hassle. You have to shop around for rates, which means getting several quotes from different lenders. You also have to produce an absolute metric ton of financial paperwork, sending in everything from bank account and brokerage statements to tax returns and pay stubs to a promise that the bank can have your first-born child if they'll lend you the money (OK, maybe that last one was an exaggeration).

I went through this entire process very late in 2023. It's not an experience I ever really want to repeat again. But, despite that, I'm actually hoping that I will be able to get another mortgage in 2024. That's because I want to get a mortgage refinance loan to pay off the debt I just took on.

Here's why I'm eager to jump through the endless hoops again to try to qualify for a new home loan this coming year, despite just going through the process.

There's a simple reason I'm hoping to refinance in 2024

There's a very simple reason why I want to refinance this year even though I just borrowed.

I bought a house at the end of last year. While I had shopped for a competitive rate from a good mortgage lender, my home closing was delayed several times so I ended up not having a lot of control over when I bought or what rate I ended up with. Sadly, this meant I ended up getting my loan at the peak of last year's rate surge and I'm paying over 7.00% for my 30-year fixed-rate mortgage.

That's a very high rate compared to the rates we've grown accustomed to in recent years. I was willing to commit to paying it, though, because I really needed and wanted my house -- and because I know I'm not locked into it forever and was hopeful it would be a very short time before I could refinance.

See, many experts believe rates will fall below 6.00% toward the end of this year. And if that's the case, refinancing could save me a lot of money and be well worth it.

When does refinancing make sense?

Refinancing a mortgage can make good sense if rates fall below your current rate. You want them to fall a reasonable amount, though, since there are upfront costs associated with getting a refinance loan and it can take time to break even on those costs.

A good rule of thumb is that it can make sense to refinance if you can drop your rate by at least 1 percentage point. So, if you have a 7.00% mortgage and can drop your rate to 6.00%, it may make sense to do so. You'd want to do the specific math though. Here's how:

• Estimate your closing costs. These could be about 2% to 6% of your loan amount. I'll be shopping for a lender that offers low closing costs around the 2% range. So, for example, if I had borrowed $400,000, then my closing costs would be about $8,000.
• Figure out how much you'll save on monthly payments. For example, if you have a $400,000 30-year fixed-rate mortgage at 7.00%, you'd have a monthly payment of $2,661 but if you dropped that rate to 6.00%, your new payment would be $2,398. So you'd save $263 per month.
• Figure out how long it would take to break even on closing costs. To make up for $8,000 in closing costs, you'd have to keep the loan for 30.4 months, or about 2.5 years.

Since I plan to stay in my house longer than that, refinancing next year if rates drop would make good sense.

If you're like me and you took out a mortgage in the last year or so, it may be worth watching when and if rates drop. You could find that refinancing could save you a good amount of money each month and may absolutely be something worth considering. You can decide by running the calculations mentioned above so you can make the choice that's right for you.