Historically, refinancing your mortgage has been an effective method for getting yourself into a better financial situation. You could lower your monthly payments, save on interest in the long run and potentially pay off your mortgage sooner.
At the time of this writing, however, mortgage interest rates are the highest they have been in decades. While this may not be the best time to be thinking of a refi, things like interest rates and inflation have historically proven to have somewhat of a cyclical nature. With that in mind, preparation is key to making the right move once things settle down. If you have been thinking about refinancing, but are apprehensive due to the current market conditions, be sure to read on so that you have a better understanding of refinancing as a concept, and bookmark this page so you can check back frequently for the latest refi rates.
With that in mind, let's look at the most up-to-date mortgage refinancing rates and dive a little deeper into the topic of refinancing.
What are current mortgage refinance rates?
What is mortgage refinancing?
Refinancing a mortgage means replacing your existing mortgage with a new one. Your interest rate, monthly payment and loan term will all change. There are several reasons why you might want to refinance, such as shortening your loan term, lowering your monthly payment or saving on interest. But the goal is always to improve your financial position.
Mortgage refinancing pros and cons
There are several points to consider with every mortgage product. There's no "one size fits all" product, and refinancing may or may not be the best option for you. To help you decide, here are some points both for and against refinancing your mortgage.
- You could lock in a lower interest rate than you had originally, bringing down your monthly payment.
- If your home's value has gone up, refinancing could be a good way to realize the equity in your home and get rid of private mortgage insurance payments.
- You can also use a refi to consolidate debt or make home improvements.
- You could refinance to change from an adjustable-rate mortgage (ARM) to a fixed interest rate if market conditions have become unfavorable.
- When you refinance, keep in mind there'll be closing costs, just like when your mortgage was first closed.
- While there's such a thing as zero-closing-cost refinancing, be aware that the closing costs don't disappear. Instead, they are simply rolled into your loan balance, making your payments higher than had you paid the closing costs out of pocket.
- Unless you refinance for a lower term, you'll add more years to your payments. It's still possible to save money in the long run by doing this, but resetting the clock to start a new term from day one may not appeal to you.
- Just because you're refinancing doesn't mean the process will be any quicker than when you originally purchased your home. The closing process could take just as long and be just as stressful.
Mortgage refinancing FAQs
What types of refinancing are available?
Several refinancing options are available, depending on what you're looking to accomplish. You should consult with your mortgage lender to see which one best suits your needs.
Rate and term
This is the most common type of refi. With this option, you leave your loan balance alone and aim to secure a lower interest rate, a shorter term or both. You can also use this option to switch from an adjustable-rate mortgage to a fixed-rate loan. Keep in mind you need to have some money set aside for closing costs, and you'll need to get your property appraised again.
With a cash-out refi, you have the option of tapping into your home's equity and withdrawing cash. This type of refi will result in a higher balance, but you can use the cash to pay off other debt or make home improvements, which may, in turn, increase the value of your home and, by extension, your equity.
Zero closing cost
Some lenders offer this option, but as stated previously, the name is a little misleading. There are still closing costs, but they are lumped into the balance of the loan, which makes the monthly payment higher than if you paid the closing costs upfront. This is available as an option on Rate and Term or Cash-Out refinancing loans.
This option allows you to make a lump sum payment to your balance as part of the refinancing process, lowering the balance of the new loan.
This allows you to refinance an FHA or VA loan with limited documentation. Appraisals are generally not required, and lenders may also waive employment verification.
When is refinancing worth it?
People refinance for different reasons. The deceptively simple answer is that refinancing is worth it when it makes sense. You need to take the time to crunch the numbers depending on what you want to accomplish.
For example, if the fixed period on your ARM has run out, and you've noticed interest rates are going up, you might want to refinance to lock in a steady rate.
Another thing to consider is your break-even point, which is how long it takes to recoup the closing costs of your refi. The Consumer Finance Protection Bureau states in its home loan toolkit that a good rule of thumb for a breakeven point is two years. That is to say that in 2 years should have recovered the closing costs for your refi with the monthly savings it represents.
If you are refinancing to a shorter term loan, the monthly saving will not be visible to you, as your payment will be higher. One thing you can do to estimate your breakeven point is to estimate how much interest you will save by refinancing to a shorter term loan. Then divide that interest by the total number of months of the new loan (for example, 180 months for a 15-year loan). The number you come up with is the "monthly savings" for the purpose of this exercise. Then divide your closing costs by your estimated monthly savings to find out your breakeven point.
There are many scenarios in which you might find yourself, but the point is you need to take the time to determine whether a refi will put you in a better financial position than where you currently are.
How can I find the best mortgage refinance rates?
What makes our data different?
Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States over the last 7 days. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.
Disclaimer: We try to keep our information current and accurate. However, interest rates are subject to market fluctuations and vary based on your qualifications. Calculator results assume a good credit score and factor in regional averages; your actual interest rate may differ. Calculator results are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making any personal financial decisions.