I Bought My Home with a 6.75% Rate - Should I Refinance Now?

If you bought your home in the past few years and your interest rate starts with a 6… or maybe even a 7… you’re not alone.

One of the most common questions I’m hearing right now is:

“I bought my home at 6.75%. Should I refinance?”

As someone who’s been helping homeowners with mortgages for over 25 years, I can tell you this:

Refinancing isn’t about chasing headlines.
It’s about strategy.

Let’s walk through how to think about this.

First — What Does Refinancing Actually Do?

A refinance replaces your current mortgage with a new one.

That new loan may:

Have a lower interest rate
Change your loan term (30-year to 20-year, for example)
Remove mortgage insurance
Allow you to access equity that you can use to pay off high-interest rate debts or make home improvements for example.
Switch loan types (like FHA to conventional)
Switch from a temporary rate buydown to a lower rate.

It’s not a second mortgage. It’s a replacement of your current home loan.

Is a 6.75% Mortgage “High”?

That depends on perspective.

Historically, 6.75% is not unusual. In fact, in the early 2000s, that was very normal.

But compared to rates in the 3% range during 2020–2021 pandemic-era, it can feel high.

The real question isn’t whether 6.75% is “good” or “bad.”

The real question is:

Would refinancing improve your financial position?

When Refinancing From 6.75% Might Make Sense

1️⃣ If Rates Drop Meaningfully Below Your Current Rate

You’ve probably heard of the “1% rule.”

That’s the idea that refinancing makes sense if rates drop at least 1% below your current rate. This is actually a “mortgage myth” as you may be able to save quite a bit more without your mortgage rate dropping a full point depending on:

Your loan balance
How long you plan to stay in the home
The cost of the refinance

Your monthly savings from the payment reduction (including elimination of debts, if restructuring debt is part of your refinance) should carry more weight than the actual interest rate reduction.

2️⃣ If You Want to Lower Your Monthly Payment

A lower rate can reduce your principal and interest payment.

This can:

Improve monthly cash flow
Offset rising property taxes or insurance
Free up money for savings or investments

For some homeowners, this alone justifies refinancing.

3️⃣ If You Have an FHA Loan and Want to Remove Mortgage Insurance

If you purchased with an FHA loan, you likely have monthly mortgage insurance.

If your home has appreciated (which many homes in Washington State have), you may be able to refinance into a conventional loan and eliminate that monthly cost.

That can make a bigger difference than the rate alone.

4️⃣ If You Want to Change Your Loan Term

Some homeowners refinance not to lower payments — but to:

Shorten their loan term
Pay off the mortgage faster
Build equity more quickly
Move from an adjustable-rate mortgage to a fixed rate rate mortgage.

If rates drop even slightly, you might be able to keep a similar payment while moving to a shorter term.

That’s strategy.

What Does It Cost to Refinance?

This is one of the biggest questions homeowners have.

Refinancing typically involves:

Lender fees
Title and escrow
Appraisal (sometimes waived)
Reserves for taxes and insurance.

Closing costs often range from 2–4% of the loan amount, though this varies.

Sometimes costs can be structured so you’re not bringing funds out of pocket — but that doesn’t mean they disappear. They’re just handled differently.

You may be starting a new “reserve account” for property taxes and insurance. If you currently have a reserve account, your current mortgage servicer will refund the balance of that account to you a couple weeks after closing on your refinance.

This is where calculating your break-even point matters.

What Is the Break-Even Point?

Your break-even point tells you how long it takes to recover the cost of refinancing through monthly savings.

Example (simplified):

If refinancing costs $4,000
And you save $200 per month
Your break-even is 20 months.

Another way to view your break-even point is to review the amortization schedule to see when you’ll return to your current balance prior to refinancing (if you’re wrapping the closing costs into the new mortgage).

If you plan to stay in your home longer than that, refinancing may make sense.

If you’re planning to move in a year? Maybe not.

Will Refinancing Reset My 30-Year Clock?

Yes — if you refinance into a new 30-year loan.

But that’s not your only option.

You can:

Refinance into a 25-year, 20-year, or 15-year term
Choose a term that aligns with how long you’ve already been paying
Pay extra principal

There’s flexibility here. It’s not one-size-fits-all. And if you just obtained your 6-7% mortgage a couple years ago, you’re not looking at a huge “reset”.

Does Refinancing Hurt My Credit?

Refinancing involves a credit inquiry, and your score may dip slightly in the short term.

However, most homeowners see minimal long-term impact — especially if payments are made on time and balances improve.

We start with a “soft-pull” on your credit and review your options before proceeding with a full credit-pull.

How Soon Can I Refinance After Buying?

In many cases:

Conventional loans: often after 6 months
FHA loans: depends on whether it’s a rate/term or streamline refinance
Cash-out refinances: typically require more seasoning

There are guidelines, so this is something I review individually.

So… Should YOU Refinance a 6.75% Mortgage?

Here’s what I tell my clients:

Don’t refinance just because rates dropped.

Refinance because it improves your financial picture.

Ask yourself:

How long do I plan to keep this home?
What would my new payment be?
What are the total costs?
What problem am I solving?

Every situation is different.

Refinancing in Washington State

Here in Washington, we’ve seen strong appreciation in many areas — including King, Pierce, and Snohomish Counties.

That appreciation may create opportunities to:

Remove mortgage insurance
Access equity responsibly
Improve loan structure

And because we don’t have state income tax, payment changes directly affect monthly cash flow.

This is why local analysis matters.

My Advice

If you bought at 6.75%, you’re not “stuck.”

You made a smart move buying when you did. While living in your home, you have been paying down your balance and probably enjoying some appreciation with your home value.

Now we simply evaluate your options.

I’m always happy to run numbers and show you:

What your new payment could look like
What your break-even timeline would be
Whether refinancing makes sense — or whether waiting is smarter

No pressure. Just clarity.

If you’d like a personalized refinance review, reach out to me anytime. I provide my clients with a side-by-side comparison of their current mortgage to other possible scenarios based on current pricing to help you make an informed decision – including if it’s not the time to refi quite yet.

It’s never too soon to start reviewing your options!

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