As of today, January 27, 2023, the average 30-year fixed mortgage refinance rate is 6.58%, FHA 30-year fixed is 6.74%, jumbo 30-year fixed is 5.40%, and 15-year fixed is 5.64%. Our rates may differ from what you see in online advertisements from lenders, but they should be more representative of what you could expect from a lender quote, depending on your qualifications. Check out the Methodology section of this page to learn more about what makes our rates different. A mortgage refinance occurs by paying off an existing home loan with a new home loan. Homeowners can refinance for a variety of reasons, and you can expect the mortgage refinancing rates on loans to be about the same as regular mortgage rates. However, if you opt for a cash-out refinance, you’ll usually pay a higher rate.
Today’s Mortgage Refinance Rates
However, you shouldn’t base your decision solely on the interest rate you’ll receive. Make sure to consider the costs associated with a refinance because it usually doesn’t come free. If you decide to refinance your mortgage, the new loan should put you in a better financial position than your old loan. For example, you should receive a better rate or get better repayment terms. If you’re not going to be in a better financial position, then you may as well keep your old loan. Written by Megan Hanna Keep in mind that mortgage refinance rates are only one factor you should consider when deciding if a mortgage refinance is right for you. Make sure to consider such things as how much the refinance will cost and the repayment terms you’re going to get (e.g., a fixed rate versus an adjustable rate, a 15-year term versus a 30-year term). Ultimately, you should only refinance your existing mortgage if you’ll end up in a better financial position.
Reduce the interest rate: People with an existing mortgage might get a lower interest rate with mortgage refinancing. Lower the payment with a longer repayment term: One way to lower your payment is to reduce your interest rate. Another way is to get a longer repayment term, which is why some people refinance their mortgages. For example, the P&I payment on a $250,000 15-year fixed-rate mortgage with a rate of 3% would be $1,726.45 compared to a monthly P&I payment of $1,054.01 with a 30-year term.Pay it off more quickly with a shorter repayment term: Conversely, some people may choose to use a mortgage refinance to pay off their debt more quickly. Let’s say you had an existing 30-year mortgage with a 6% rate and an original balance of $300,000 that you had been paying on for five years. If you were to refinance the principal balance into a 15-year mortgage with a rate of 2.20%, your P&I payment would increase slightly from $1,798.65 a month to $1,822.26 a month, but your loan would be paid in full in 15 years.Cash out some of their equity: People sometimes choose to refinance their mortgage to cash-out some of their equity. With a mortgage refinance, you might be able to get a bigger mortgage than your original mortgage. The extra money will be distributed to you in cash. Keep in mind you’ll need to have enough equity in your home to support the refinance, either from appreciation in your home’s value or the principal payments you’ve made over time. Consolidate other housing debt: Sometimes, people have a second mortgage or a home equity loan. They might use a mortgage refinance to consolidate this debt into one loan. In doing so, it’s simpler to keep track of what’s owed. Plus, home equity loans often have variable rates. There’s an additional risk with a variable rate since your payment will change as rates increase or decrease. By combining the debt into one fixed-rate mortgage, you’ll no longer have to worry about changes to your P&I payments.
There are many reasons why people might use mortgage refinancing. Before you decide to do this, think about what you’re trying to accomplish and how much the refinance will cost you. You’ll likely need to pay fees for a new appraisal on your home, as well as other closing costs. That said, carefully consider a mortgage refinance to make sure it’s worth it in the long run and that it’s helping improve your financial condition. And remember, take care to avoid situations that could potentially put you in a worse financial position. For example, you might be able to get a lower rate on an adjustable-rate mortgage (ARM) than a fixed-rate mortgage, but you could end up paying a higher rate when it adjusts in the future. Therefore, make sure you aren’t sacrificing long-term benefits for short-term gains. With a cash-out refinance, not only are you increasing your loan amount, but you’re also reducing the amount of equity in your home. This means your loan-to-value (LTV) ratio will be higher (worse) after the cash-out refinance. The increased loan amount and higher LTV ratio are riskier to the lender. Lenders usually make up for this added risk by charging a higher interest rate than what you would have been able to get if you didn’t take out additional cash. The reason rates are lower with shorter fixed-rate mortgages than with longer fixed-rate mortgages is because shorter terms are considered less risky than longer terms. One reason longer terms are riskier to lenders is that there is more interest rate risk. If rates go up, lenders are potentially stuck with a low rate loan for a longer period of time. This means they might not be able to make as many new loans, which could carry higher rates and make them more money. Another reason longer terms are riskier to lenders is that there’s more risk that something unexpected might happen that negatively affects your ability to repay the loan. For example, you might lose your job or there could be a recession or economic downturn that affects your ability to repay. To make up for this additional risk, lenders will charge a higher interest rate on longer fixed-rate term loans. To put this in perspective, estimated APRs and monthly payments for four different credit scores on a $350,000 30-year fixed-rate mortgage are shown in a chart below. As you can see, people with exceptional credit may be able to receive a rate that’s almost 1.6% less than someone with fair credit. The impact on the monthly P&I payment for a $350,000 loan in our example was a difference of over $300. All of this additional money goes toward interest costs making the same loan cost more for people with worse credit. That said, it’s smart to wait until you’ve gotten your credit score as high as it can be before you apply for a mortgage refinance. The amount of time for a credit score improvement will depend on the severity of your credit issues. For example, if you’ve built up large credit card balances, this may be a quicker issue to resolve than a recent car repossession. But if you want to qualify for the best mortgage rate possible, be patient and stay the course. Eventually, you’ll improve your credit score. Also, rates may vary depending on whether you get a conforming vs. FHA loan, a loan that’s insured by the Department of Veterans Affairs (a VA loan), a loan insured by the USDA, or even a jumbo loan. For example, as of June 2022, the average 30-year fixed rate for a VA loan was 5.520% compared to a rate of 5.950% for a conforming mortgage. Rates for some of the most common types of mortgages for the most recent three years are shown in a chart below. Keep in mind, mortgage rates fluctuate based on economic trends like inflation, unemployment rates, and monetary policies set by the Federal Reserve. For this reason, in a low interest rate environment, it’s a good idea to lock in your rate as soon as possible. Conversely, in higher interest environments where rate reductions are expected in the near-term, then it might be wise to hold off locking in the rate for a little while. However, in that situation, you do run the risk that interest rates might increase before you lock yours in. The bottom line is that mortgage rates change quickly and frequently. Pay attention to what’s happening in the market so you’re able to secure the best possible interest rate. These mortgage rates are for informational purposes only. Rates may change daily and are subject to change without notice. Loans above a certain threshold may have different loan terms, and products used in our calculations may not be available in all states. Loan rates used do not include amounts for taxes or insurance premiums. Individual lender’s terms will apply.
