SUMMARY: With interest rates starting to inch down, it may be time to consider refinancing to lower monthly payments or pay off your home sooner rather than later.

Two years ago, 30-year mortgage rates hit 7.79%. Since then, rates have fallen. In September 2025, the average rate dipped to the low 6% range, with 15-year fixed rate mortgages falling to mid-5%. 

With numbers this compelling, you may wonder if it’s time to refinance your loan. How can you decide if a refinance is right for you? Sandra Moody, a mortgage production supervisor at American Airlines Federal Credit Union, says homeowners can take advantage of the Credit Union’s resources and experts to help them decide. 

Making the Right Choice

Right now, the bulk of mortgages applied for are for new purchases. Few people are refinancing because most Americans purchased homes before rates soared. According to a recent Realtor.com study, about 21% of Americans have mortgages with interest rates under 3% and about 33% have rates between 3% and 4%. About 29% of mortgage holders are paying more than 5% interest. 

Still, there are good reasons for refinancing today, Moody says, including: Getting a rate reduction, shortening the term of an original mortgage loan, or refinancing to access the equity in your home. Most current refinances fall into the third category. According to Mortgage Monitor, a mortgage data and performance organization, cash-out refinances made up 59% of all refinance transactions in the second quarter of 2025. Borrowers took out an average of $94,000 of their home equity, with 70% of those loans written at a higher interest rate than they were already paying.  

If you’re looking to refinance, consider the 1% rule of thumb, Moody says. “We tell our members that, overall, you want to reduce your interest rate by at least 1% if you’re going to refinance. That’s where you're going to see the best savings.” 

Simple math bears this out. If you owe what the average American does on their mortgage – around $252,505 – going from a rate of 7.79% to 6.79% is a big savings. At 7.79%, a homeowner pays $1,815 per month with interest totaling more than $401,000. At 6.79%, the monthly rate drops to $1,644 with interest totaling more than $339,500.

There are exceptions to the 1% rule, though. You may want to pursue a refinance at a higher interest rate if you’re looking to pay off credit card debt, which typically has interest rates in the teens or even low 20 percentage range. A refinance mortgage will also be cheaper than a personal loan and – most importantly for people with lower credit scores – the Credit Union’s refinance rates are the same whether you have a 650 credit score or an 800. “Being a credit union, we're very different from other lenders, because we do not adjust our interest rates according to your credit score,” Moody adds.

Checking All the Boxes

No matter what your reason is for refinancing, it’s important to understand the real cost of your loan. The Credit Union has an online refinance calculator that’s available 24/7 so you can play with the numbers and see your actual savings. You can also call the Credit Union’s loan officers to discuss your concerns and questions. The department’s hours are 7 a.m.-7 p.m. Central Time Monday through Friday. “Members can get answers and walk through the loan process,” Moody says. 

They’ll also help you understand the closing costs and fees associated with a refinance. Closing costs include an appraisal, title, and survey, although surveys used for a member’s first mortgage can often be reused if the property hasn’t changed since the first purchase. 

If you’re only starting to think about a refinance, you can reach out to the Credit Union’s Mortgage Department and speak with one of their lending specialists. They can help you develop a savings plan, discuss goals, and see how different loan products fit into your life plans. They can also help you figure out when to apply for a loan. A refinance can take longer than a first mortgage to process – about 45 to 60 days – so if you’re looking to put in a pool, you’ll need to start your application in late winter or early spring. 

In some cases, they might suggest other loan options, such as a Home Equity Line of Credit (HELOC), which allows you to draw cash based on what you need and when. This may keep payments lower since you’re only making payments on what you’ve taken out.