Mortgage Rates at 3-Year Lows: Should You Refinance a 3% Mortgage?

Mortgage Rates Are Down — But Homeowners Are Still Hesitating

Mortgage rates have fallen to three-year lows, and on the surface, that sounds like a green light to refinance. But many homeowners are stuck in a difficult spot.

On one hand, they’re carrying high-interest debt:

• Credit cards charging 18%–25%

• HELOCs now fully indexed in the 7%–10% range

On the other hand, they’re sitting on something incredibly valuable:

• A first mortgage rate between 2% and 5%

And the fear is real:

“I don’t want to give up my low mortgage rate — even if my other debt is expensive.”

That fear is understandable. But it can also be expensive.

Why a 3% Mortgage Is a Financial Asset

A low fixed-rate mortgage isn’t just a loan — it’s an asset.

Replacing a 3% mortgage with a higher-rate loan means:

• Higher long-term interest costs

• Resetting amortization

• Losing inflation protection

That’s why you hear advice like “Never refinance a 3% mortgage.”

But that advice ignores one critical factor…

The Hidden Cost of High-Rate HELOCs and Credit Cards

HELOCs are variable-rate loans, typically tied to Prime. Over the last two years, many homeowners watched their HELOC rates:

• Double

• Triple

• Increase thousands of dollars per year in interest

A $100,000 HELOC at 9% costs $9,000 per year in interest alone — and that number can rise again if rates increase.

So the real question isn’t “Is refinancing bad?”

The real question is:

At what point does keeping high-interest debt cost more than giving up a low mortgage rate?

The Break-Even Question Most Lenders Don’t Answer

Instead of blanket advice, the decision should come down to math.

That’s why we created The 3% Mortgage Decision Calculator — a side-by-side break-even tool that compares:

• Keeping your existing low-rate mortgage and HELOC
  vs

• Doing a cash-out refinance to eliminate high-interest debt

The calculator accounts for:

• Interest rates

• Loan balances

• Closing costs

• Time horizon

• Rising HELOC rates

The Result That Surprises Most Homeowners

Here’s what the numbers show:

A homeowner with a $29,000 first mortgage at a low rate and a $100,000 HELOC may break even in as little as 12 months by refinancing — even after giving up the low mortgage rate.

That doesn’t mean refinancing is always the right move.

It does mean that the cost of high-interest debt is often underestimated.

Closing Costs Change the Math — Here’s Why Timing Matters

Refinancing isn’t free. Closing costs matter.

The real question becomes:

• How long will it take for interest savings to exceed the cost of refinancing?

For some borrowers, the true break-even point is:

• 12 months

• 24 months

• Or never — depending on balances and rates

That’s why time horizon is critical.

If you plan to sell, refinance again, or aggressively pay down debt soon, the answer may change.

HELOC Rate Stress Test: What If Rates Rise Again?

HELOCs don’t stay still.

In our stress-test scenarios:

• A HELOC rising from 7.5% to 9.5% increases interest costs by $2,000 per year

• Without borrowing a single additional dollar

In many cases, a refinance that doesn’t make sense today becomes the smarter option later — especially when rate volatility is factored in.

When a Cash-Out Refinance Can Make Sense

A refinance may be worth considering if:

• Your first mortgage balance is relatively low

• Your HELOC or credit card balances are large

• You plan to stay in the home long enough to reach break-even

• You want protection from future rate increases

When It Usually Doesn’t

Keeping your low-rate mortgage may be better if:

• Your first mortgage balance is large

• You expect to move soon

• You can aggressively pay down the HELOC

• Closing costs outweigh long-term savings

The Bottom Line: This Is a Math Decision, Not a Fear Decision

There’s no universal answer.

The right decision depends on your numbers, not headlines or rules of thumb.

That’s why Mojave River Mortgage provides custom break-even and HELOC stress-test analyses, so you can make an informed decision — not a rushed one.

Get the Free Calculator

📊 The 3% Mortgage Decision Calculator
See exactly when refinancing helps — and when it doesn’t.

👉 Available upon request from Mojave River Mortgage, Contact Us Online Or call (760) 713-6137

Final Call to Action

If you’re carrying high-interest credit cards or a HELOC and wondering whether refinancing makes sense without sacrificing long-term financial security, we’re happy to help.

Mojave River Mortgage
Faster. Easier. Smarter lending decisions.