So, the Federal Reserve is expecting to cut rates on Wednesday and another rate cut is expected before the end of the year. But remember, this is the short term Fed Funds rate -- not mortgage rates -- mortgage rates are based on the 10 Year Bond and the market sets pricing for the 10 Yr Bond. So, mortgage rates can even go up after this rate reduction. We really don't know. But here is a strategy to refinance now to take advantage of lower rates and also refinance going forward.

If you have financed your mortgage in the last four years, refinancing can be a smart move, to lower your payment -- some times substantially. However, the process involves closing costs—typically 2% to 5% of the loan amount—which can deter some borrowers. Many ponder, 'maybe we should wait until rates decline further.'

One effective strategy is to slightly increase the interest rate to cover these expenses. Known as a “no-closing-cost refinance,” this approach allows borrowers to avoid paying fees upfront by accepting a marginally higher rate -- depending on the loan size this can be only a 1/4th or 1/8th increase in rate. The lender uses the small rate increase to generate a credit that offsets the closing costs. While this option may result in a slightly higher monthly payment, it makes sense to lock in this lower rate in case interest rates rise going forward -- which is always a possibility.

This works well for borrowers who plan to stay in their homes for only a few years, or who expect rates to drop further and refinance again -- which we can do in six months, adding to the rate to cover costs can make solid financial sense. Ultimately, the key is to balance long-term savings with upfront affordability—evaluating how long it will take to recoup any added expenses through lower monthly payments.

Call or text today at 248-361-1500 or email me at klewis@lewisfin.com