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Both 15-year fixed and 30-year fixed refinances saw their mean rates slump this week. The average rates for 10-year fixed refinances also slumped.
- 30-year fixed refinance: 7.01%
- 15-year fixed refinance: 6.36%
- 10-year fixed refinance: 6.09%
Mortgage rates have been dropping since early November but remain relatively high, so millions of homeowners are staying put until rates ease more. But with the Federal Reserve taking its third consecutive pause from its aggressive rate-hike policy and promising three rate cuts throughout 2024, the opportunity to refinance might come sooner rather than later.
That’s especially true for homeowners who bought homes with rates near or above 8%. “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,” said Matt Graham of Mortgage News Daily.
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. Rates are currently between 6% and 7%, but your personal interest rate will depend on your credit history, financial profile and application.
Here are the average refinance rates provided by lenders across the US. We track refinance rate trends using data collected by Bankrate:
Today’s refinance rates
|A week ago
|30-year fixed refi
|15-year fixed refi
|10-year fixed refi
Rates as of December 26, 2023.
What does it mean to 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 financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly. But today’s mortgage market conditions aren’t ideal. 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 30-year fixed refinance rate right now is 7.17%, a decrease of 4 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
For 15-year fixed refinances, the average rate is currently at 6.36%, a decrease of 9 basis points over last 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 6.09%, a decrease of 11 basis points from what we saw the previous 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.
What is influencing the direction of refinance rates?
When mortgage rates hit historic lows during the pandemic, there was a refinancing boom, as homeowners nabbed lower interest rates on their home loans. But with current rates, refinancing might not actually save you money.
Though refinancing activity has picked up recently, the overall level of refinance applications is still very low compared to early 2021. Mortgage rates are expected to go down throughout 2024.
When to consider a mortgage 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.
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