Current Mortgage Rates: Compare Today’s Refinance Rates

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Replacing an existing loan with a new one is called refinancing. Homeowners often refinance because their credit has improved or interest rates have fallen since they first borrowed and they think they can get a lower rate. Others refinance in pursuit of lower payments or to switch their loan type. 

Factors that determine your refinance rate include the Fed’s rate, your credit score and income. This article will explain what it means to refinance, when it makes sense and when it doesn’t, while giving you a glimpse at average current rates. 

Mortgage Refinance Rates Today: What You Need to Know

The following is a snapshot of current mortgage interest rates, but keep in mind they fluctuate regularly and are vulnerable to changing economic conditions and Fed policy. Loan interest for 30-year fixed-rate mortgages has remained under 7% for nine straight weeks, which is neither historically high nor low. 

In 1981, they peaked at nearly 19%. At the end of 2020, they fell to nearly 2.5%.

However, an economist told the Associated Press that today’s subdued rates are good for both buyers and sellers as rising home prices and high interest rates had cooled the market before financing started to loosen up.

When reading the following rate breakdown, keep in mind that mortgage refinance rates might be slightly higher or lower than those of standard home loans.

Current Refinance Rates by Loan Type

Is Now a Good Time to Refinance?

Here are the signs that refinancing might make sense for you. 

• Current interest rates are significantly lower than your existing rate — your savings must compensate for the fees and expenses associated with refinancing.
• You want to shorten your loan term and save on interest.
• You want to lower your monthly payment, or you can manage a higher payment if refinancing reduces your loan term.
• You need to switch from an ARM to a fixed-rate mortgage.
• You want to access your home equity through a cash-out refinance.

If any of these apply, it might be better to wait. 

• Interest rates aren’t much lower than your current rate.
• Your score is too low to get a competitive rate.
• The closing costs negate the potential savings.

How to Get the Best Refinance Rate

Follow these steps to secure the best possible terms and interest rate on your refinance.

1. Check your credit score and work to improve it by looking for errors on your credit report, paying down debt, and making on-time payments.
2. Shop around and compare multiple lenders, including big banks, community banks, credit unions and online lenders.
3. Calculate the monthly payments, long-term finance charges, and closing costs for different kinds of loans, e.g., 15-year vs. 30-year.
4. Lock in your rate at the right time.
5. Negotiate lender-specific closing costs like processing fees and origination fees.

Average Mortgage Price and Refinancing Costs

It’s essential to factor fees and costs into your calculations when deciding whether refinancing is the right move and when choosing a lender and a loan. According to Chase, closing costs are typically between 2% and 6% of the loan amount — that’s $4,000 to $12,000 on a $200,000 loan.

Common closing costs include: 

• Appraisal fees: The cost of having a professional appraiser assess the value of your home typically ranges from $300 to $500.
• Loan origination fees: The cost of processing and underwriting a loan usually costs between 0.5% and 1% of the loan value. 
• Mortgage discount points: Borrowers can choose to buy down their interest rate, which adds to the upfront costs but can save money in the long run

Once you know your closing costs, you can calculate your break-even point, which will determine whether the refinance makes sense according to your future plans with the property. You end up saving money if you stay in your home beyond the break-even point and lose money if you don’t.

For example, if refinancing saves you $50 per month, but the new loan has $5,000 in closing costs, it would take you 100 months, or just over eight years, to break even. 

Alternatives to Traditional Refinancing

Before you sign a traditional refinancing agreement, consider the following alternatives. 

• Cash-out refinance: Tap your home equity by taking out a loan for a higher amount and receiving the difference as cash.
• Home equity loan: A home equity loan lets you borrow against the equity in your home with lower rates and better terms than you’d likely get from a personal loan.
• HELOC: Taking out a home equity line of credit is another way to borrow against your home’s equity without refinancing. In this case, you’ll borrow what you need when you need it instead of securing a fixed amount like a traditional installment loan.
• Streamline refinancing options for FHA and VA loans: Streamlining refers to refinancing existing government-backed loans with limited borrower credit documentation and underwriting.

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