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When you refinance a home loan, you're replacing your current mortgage with a new one that comes with new terms. People often refinance to get a lower interest rate or otherwise shrink their monthly payment.
Mortgage refinance rates
See how mortgage refinance rates are trending today.
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30-year mortgage refinance rates
A 30-year fixed-rate mortgage will have a higher rate than a mortgage with a shorter term.
Mortgage rates across the board increased significantly over the past couple of years, and mortgage refinance rates have been no different.
Rates are expected to trend down this year, though they've been elevated in recent months. Average 30-year refinance rates were around 7.49% in May, according to Zillow data. This is flat from the previous month's average.
So far this month, refinance rates have been trending higher. Refinance rates also tend to be a bit higher than purchase rates.
Because rates are still relatively high, it's probably not a good idea to refinance at the moment. If you're seriously struggling with your monthly payments, refinancing into a 30-year term could lower your monthly payment, since it would spread your payments out over a longer period of time. But that means you'll end up spending a lot more on interest in the long run.
15-year mortgage refinance rates
Because their terms are shorter, 15-year mortgage rates are lower than 30-year fixed-rate mortgages. When you refinance into a 15-year fixed rate, you'll pay off your new mortgage over 15 years. You'll get a lower rate than you would with a longer term, but your monthly payments will be higher because you're paying off the same mortgage principal in half the time.
In May, 15-year refinance rates averaged around 6.37%, just four basis points down from the month before. But 15-year refinance rates have been a bit lower this month.
Mortgage refinance rate trends
Average refinance mortgage rates trended down toward the end of 2023 and started the year relatively low. But they've increased recently in response to hotter-than-expected inflation.
Inflation should slow this year, but it may a bit longer than initially expected. As inflation eases, mortgage rates are expected to go down in 2024 as a result.
Why refinance?
Lower interest rates
If you can get a lower mortgage rate than what you're currently paying, it may be worth it to refinance. Not only will this enable you to lower your monthly payment, but you'll also cut down on the amount of interest you'll pay over the life of the loan.
Change loan terms or type
If you want to change any of the features of your loan, you'll need to refinance. Many borrowers refinance to change their loan term. For example, you might refinance into a shorter term (like going from a 30-year to a 15-year mortgage) to cut down on interest costs or pay off your mortgage faster. Or, you might refinance into a longer term to lower your monthly payment
It's also common to refinance if you have an adjustable-rate mortgage. Refinancing from an ARM to a fixed-rate loan locks your monthly payment in, so you don't have to worry about it going up over time. Or, you could refinance into a different type of mortgage. FHA borrowers sometimes refinance into a conventional loan once they reach 20% equity so they can get rid of the FHA mortgage insurance.
Take cash out
Cash-out refinancing allows you to take money out of your home and use if for things like debt consolidation or home improvements. If you have enough equity in your home, you can get a cash-out refinance to turn some of that equity into cash. To do this, you'll get a new mortgage for more than you owe on your current mortgage. The new mortgage will pay off the current mortgage, and you'll pocket the rest of the loan proceeds.
When not to refinance
If you're considering refinancing but aren't sure it's the right move, here are some things to consider:
- You'll have to pay closing costs. Refinancing isn't free, and the cost to get a refinance could add up to several thousand dollars that you'll have to pay at closing.
- If you move too soon, you won't break even. If you don't keep the new mortgage long enough, you may end up spending more on closing costs than you'll save by refinancing.
- You could end up paying more in interest. Getting a longer term can save you money on a monthly basis, but over the life of the loan you'll have higher interest costs.
- Your monthly payments could go up. If you refinance into a shorter term, you'll have the benefit of paying off your mortgage faster, but you'll take on a higher monthly payment to do so.
How to get the best refinance rates
Shop around
To get the best rates on a refinance mortgage, shop around and get mortgage preapproval with at least two or three lenders to find the best mortgage refinance lenders for you. Compare offers and see who can give you the best overall deal, including both the rate and fees.
Improve your credit score
Your credit score will help determine what rate you get. Making on-time payments and paying down debt can improve your credit score and help you get a lower rate.
Timing matters
Mortgage rates are heavily influenced by what's going on in the broader economy, and even borrowers with great credit profiles will still only have access to rates within a certain range. Mortgage rates tend to be high when the economy is doing well and low when there's a downturn.
If you got your mortgage when average rates were low, you might not get as many opportunities to refinance since your rate is already relatively low. But if you got your mortgage when rates were high, it might be worth it to refinance when rates drop back down.
Average cost of a mortgage refinance
As with your initial mortgage, you'll pay closing costs when you get a refinance mortgage. According to the Federal Reserve, refinance closing costs are usually 3% to 6% of your remaining mortgage principal. This comes to $3,000 to $6,000 for every $100,000 you borrow.
When you consider the cost to refinance your mortgage, consider whether the financial tradeoff will be worth it. You may cut your monthly payments by hundreds of dollars, or lock in a significantly lower rate that will save you thousands in the long run. In these cases, you may decide you're comfortable paying closing costs.
Current mortgage refinance rates FAQs
Yes, mortgage rates (including refinance rates) can change daily or even hourly.
Refinance rates for 30-year fixed-rate mortgages have generally remained in the upper 7% range in recent weeks, with some occasional volatility sending them higher or lower.
When you refinance a mortgage, you replace your original mortgage with a new one, which has a different interest rate and term length. As a result, your monthly payment amount will also change.
Mortgage refinance rates are typically a little higher than purchase rates.
It depends on the lender, but many companies want you to have at least 20% equity to refinance a conventional mortgage or to get a cash-out refinance. You should be able to refinance with less if you have an FHA, VA, or USDA mortgage.
It depends on your current mortgage rate and what rate you could get refinancing. With a substantial rate reduction, you could potentially lower your monthly payment by a couple hundred dollars or more. But it depends on your rate and how much you owe on your mortgage.
You might initially see your score go down a bit when the lender checks your credit after you submit your refinancing application. But this is just a temporary reduction, and your score should bounce back.
Yes, you'll need to pay closing costs when you refinance, just like you did when you got your original mortgage.
You should make sure that you're achieving your goals with a refinance and the amount you're spending doesn't exceed your overall savings. If you're planning to move soon or you can't get a significantly lower rate, refinancing might not be right for you.
What's a Zestimate?
