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Both 15-year fixed and 30-year fixed refinances saw their mean rates trail off this week. The average rates for 10-year fixed refinances also trailed off.
- 30 Year Fixed Refinance: 7.18%
- 15 Year Fixed Refinance: 6.41%
- 10 Year Fixed Refinance: 6.14%
Mortgage refinance rates have soared since early 2022 and millions of homeowners remain locked in to the lower fixed rates they secured years ago. With the Federal Reserve taking its third consecutive pause from its aggressive rate-hike policy, mortgage rates have finally started to ease, but they’re not expected to stabilize until next year.
Some homeowners who bought homes with rates near or above 8% could soon see substantial enough rate dips to consider refinancing, according to Matt Graham of Mortgage News Daily. “The best bet there is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough drop,” Graham said.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Refinance rates for homeowners
In today’s high-rate environment, refinancing is less attractive. The lowest rates advertised by lenders are currently around 7%, but your personal interest rate will depend on your credit history, financial profile and application.
Here’s are the average refinance rates reported by lenders across the country. We track refinance rate trends using information collected by Bankrate:
Today’s refinance rates
Product | Rate | A week ago | Change |
---|---|---|---|
30-year fixed refi | 7.21% | 7.57% | -0.36 |
15-year fixed refi | 6.41% | 6.80% | -0.39 |
10-year fixed refi | 6.14% | 6.85% | -0.71 |
Rates as of December 18, 2023.
How to choose a refinance
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great move if you score a low rate or manage to pay off your home loan in less time, but consider whether it’s the right choice for you at the moment. If you can reduce your interest rate by 1% or more, that could be enough financial incentive to refinance. Yet given elevated rates, you probably won’t be able to secure a significantly lower rate than your current one. If you decide to refinance, compare rates, fees and the annual percentage rate — which reflects the total cost of borrowing — from different lenders to find the best deal.
30-year fixed-rate refinance
The average rate for a 30-year fixed refinance loan is currently 7.21%, a decrease of 36 basis points from what we saw one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
15-year fixed-rate refinance
The average 15-year fixed refinance rate right now is 6.41%, a decrease of 39 basis points from what we saw the previous week. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
10-year fixed-rate refinance
The current average interest rate for a 10-year refinance is 6.14%, a decrease of 71 basis points over last week. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
Where will refinance rates end up?
When mortgage rates hit historic lows during the pandemic, there was a refinancing boom, as homeowners were able to nab lower interest rates. But with current average rates above 7%, getting a new home loan isn’t as financially viable.
Refinancing activity has picked up since last year, but the overall level of refinance applications is still very low in comparison with early 2021.
When should I refinance?
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
- To get a lower interest rate: If you can secure a rate that’s at least 1% lower than the one on your current mortgage, it could make sense to refinance.
- To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage.
- To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity.
- To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
- To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
- To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
How to find personalized refinance rates
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
Refinancing can be a great move if you get a good rate or can pay off your loan sooner, but consider whether it’s the right choice for you at the moment.
Source: cnet.com