Understanding Refinance Rates in Arizona

Bought a condo in Scottsdale back in 2018. Then refinanced twice – once in 2020 when rates dropped, and almost a third time in 2021 before I came to my senses about closing costs.

Living in Arizona means dealing with a pretty specific housing market. Here is what I have learned about refinancing out here, including some mistakes that cost me money.

How Arizona Refinance Rates Work

Honestly, refinance rates in Arizona are not that different from national rates. We are not like a special economic zone or anything. But there are some local factors worth knowing about.

The Phoenix metro area drives a lot of the state housing market. When things are hot in Phoenix and Scottsdale, lenders are busy and rates can creep up just from demand. When things cool off, you might find lenders more willing to deal.

Tucson is a bit different – more stable, less boom-and-bust. If you are down there, the market dynamics are calmer.

What Actually Affects Your Rate

Same stuff as anywhere, but let me get specific:

Credit Score

Mine was around 740 when I refinanced the first time. Got a decent rate – 3.1% on a 30-year. If I had been at 780+, might have been closer to 2.9%. Below 700 and you are looking at maybe 0.5-1% higher.

Before applying, I paid down my credit cards and made sure nothing weird was on my report. Took about 60 days to see the score bump from those changes.

Loan-to-Value Ratio

Arizona home values went crazy the last few years. Good news: your LTV might be lower than when you bought, even without paying much principal. My condo appreciated like 40% in three years which helped my refinance terms a lot.

If you are upside down or have low equity, refinancing gets harder. Might need to look at specific programs or wait for values to improve.

Debt-to-Income

Lenders want this under 43% typically. Add up all your monthly debt payments, divide by gross monthly income. I was at like 31% which helped.

Fixed vs. Adjustable in Arizona

People here love ARMs for some reason. Maybe it is the California transplants bringing that mentality over. I get the appeal – lower initial rate, and if you are only staying 5-7 years before selling, you might come out ahead.

But I have seen what happens when people bet wrong on timing. Friend of mine got a 5/1 ARM in 2019, figured he would sell before it adjusted. Still has the house. Now his rate is adjusting upward and he is not happy.

I went fixed both times. Yeah, I left some money on the table initially. But I sleep fine not worrying about rate adjustments.

The Best Time to Refinance Here

Honestly? When rates are lower than what you currently have and closing costs make sense. That is it. I know people who wait for the perfect bottom and miss windows entirely.

Some Arizona-specific timing stuff though: late summer is when the market slows down a bit (too hot for open houses), and lenders can be more aggressive with rates. Spring is busiest – everyone wants to move before summer hits.

Also, if you can close before or after snowbird season, the title companies and appraisers are less slammed.

What I Paid in Closing Costs

First refinance in 2020: about $4,200 on a $280k loan. That included appraisal ($450), title insurance, origination fee, and a bunch of smaller stuff.

Second refinance quote in 2021: would have been around $5,000. The rate was only 0.25% lower than my existing loan. Did the math – would have taken over 4 years to recoup closing costs. Passed on it.

That break-even calculation matters. Divide closing costs by monthly savings. That is how many months before you actually benefit. If you might sell before then, refinancing does not make sense.

Lenders I Used and Considered

First refi was through my credit union (Arizona Federal). Rate was competitive and they were easy to work with since I already had accounts there.

Second time I shopped around more. Got quotes from:

• Local credit union – slightly lower rate
• Big bank (Wells Fargo) – middle of the pack
• Online lender (Better.com) – competitive but the process felt impersonal
• Mortgage broker – ended up with the best rate but slower process

Ended up going with the broker the second time because the rate was noticeably better. But I almost went credit union again just for convenience.

Arizona-Specific Gotchas

HOA situations are big here. If you are in a condo or planned community (which is like half of metro Phoenix), the lender needs HOA docs. Make sure your HOA is responsive because delays here can blow your rate lock.

Also, a lot of Arizona properties are in flood zones now that did not used to be. If yours is, expect flood insurance requirements to affect your escrow and overall payment. Found this out during my appraisal – thankfully I was not in a zone but my neighbor was.

Solar panel ownership vs. leasing matters too. If you have leased panels, that complicates things. Owned panels usually help your property value.

My Actual Refinance Story

Bought the condo in 2018 at 4.375%. Not great but it was what I qualified for at the time.

In March 2020, rates tanked. Got in at 3.1% and reduced my payment by about $180/month. Closing costs were recovered in under 2 years.

Could have gone lower if I waited until late 2020 or 2021 – rates hit like 2.5% at one point. But I did not know that would happen. Timing the absolute bottom is mostly luck.

Should You Refinance Right Now?

I do not know what rates are when you are reading this. But here is my framework:

If you can lower your rate by at least 0.5% AND you plan to stay 3+ years, probably worth running the numbers.

If you are just chasing a tiny rate drop, closing costs might eat your savings.

If you need cash out for renovations or debt payoff, that is a different calculation. Sometimes makes sense even at similar rates.

Talk to a couple lenders, get actual quotes (not just rate estimates), and do the break-even math. That is the only way to know if it works for your situation.

Arizona housing is weird right now. But the basic refinance math is the same as anywhere. Run the numbers, be honest about how long you are staying, and do not get greedy trying to time the market perfectly.