How to find today’s mortgage refinance rates
NerdWallet’s comparison tool can help you find current refinance rates for your mortgage. In the filters above, click or tap "Refinance" and enter a few details about your home loan. We’ll scan multiple lenders to provide you with personalized rate quotes within moments and without a credit check.
How do you get the best mortgage refinance rate?
In terms of factors you can alter, your credit score is front and center for influencing the refinance rate you will receive. Check your credit report before refinancing to make sure there aren’t any errors. Build your credit score before refinancing by paying your bills on time and keeping credit utilization low.
Debt is also important. For a conventional loan refinance, lenders usually want a debt-to-income ratio of no more than 36%. Your DTI is the amount of debt you pay each month divided by your gross, or pre-tax, monthly income.
The type of refinance can also affect your interest rate. Lenders generally consider cash-out refinances to be the most risky, because they entail borrowing against home equity and taking out a larger loan. As a result, cash-out refinances tend to have higher interest rates than rate and term refis.
To ensure you’re getting the best possible rate, request quotes from multiple refinance lenders. Compare the interest rate, annual percentage rate (APR), estimated closing costs and other fees included on each Loan Estimate.
And don’t forget to lock in your refinance rate. A rate lock will prevent the interest rate you've been offered from rising before your loan closes. Some lenders also offer a “float down” option, which will protect you if rates take a downward turn.
» MORE: How mortgage rates are set
How does a mortgage refinance work?
With a mortgage refinance, you replace your current home loan with a new one. Much like when you bought your home, you’ll have to meet the lender’s refinance requirements and go through the application and closing process. A record of paying your mortgage on time isn't enough; you'll need to be sure you can qualify for the new loan.
Though you don't make a down payment when you refinance, refinancing isn't free. You'll pay refinance closing costs, which generally run from 2% to 6% of the amount of your new loan. So for example, if you're refinancing $250,000, your closing costs will probably be between $5,000 and $15,000. Closing costs on a refinance include the origination fee, the appraisal and discount points.
Some lenders offer no-closing-cost refinances. With these loans, you don’t have to pay the closing costs upfront, but you will pay them one way or another. Lenders cover the cost of the refinancing by charging a higher interest rate or rolling the fees into the total loan amount. Increasing your loan amount bumps up the amount you'll pay monthly as well as over the life of the loan.
Refinancing also takes time, at least four to six weeks. Among other things, you'll go through underwriting, and the lender will get an appraisal. In most instances, this isn't a big deal; it's not like you're waiting to move. But if you were, say, looking to get money from a cash-out refinance to fix something urgent, a refi may not be your best bet. Depending on the amount you need, you might consider another way to finance major home repairs or renovations.
When should you refinance your mortgage?
There are several reasons you might choose to refinance your mortgage. In some cases, you may be able to accomplish more than one of these goals at once: for example, switching loan types and changing the loan's term. You might refinance to:
Lower your interest rate. If rates have dropped since you bought your home or your credit score has improved, a rate and term refinance may allow you to reduce your monthly mortgage payment. A lower interest rate could also save you a considerable amount of cash over the life of the loan.
Pay off your mortgage quicker. You can pay off your loan faster by refinancing from a 30-year mortgage to a 15-year mortgage, for example. While your monthly payments will rise, shortening your loan term could dramatically reduce the amount of interest you'll pay.
Tap into your home equity. With a cash-out refinance, you take out a new mortgage for more than your current loan balance. You receive the difference between the two amounts in cash, which you can use as you like. A cash-out refinance can be risky because you're getting a larger loan with your home as collateral, so it's generally considered safest to use the proceeds for something that improves your bottom line. For example, a major renovation could add to your home's value.
Switch from an adjustable-rate to a fixed-rate mortgage. If you want more payment stability, you can refinance your adjustable-rate mortgage to a fixed-rate mortgage. After a specified amount of time, the rate on the ARM may adjust higher, while the rate stays the same with a fixed-rate loan.
Eliminate private mortgage insurance. If you bought your home with less than 20% down, your lender likely required you to take private mortgage insurance, or PMI. This protects the lender in the event you default on the loan. If you’ve gained enough equity in your home, you can refinance to eliminate the PMI. However, it may make more sense simply to pay for an appraisal to cancel your mortgage insurance early.
Cancel FHA mortgage insurance. Refinancing is usually necessary to remove FHA mortgage insurance, which is determined by the amount of your down payment, not your equity. Going from an FHA loan to a conventional loan allows you to drop FHA mortgage insurance. But be sure you'll have at least 20% equity, so you don't end up paying private mortgage insurance.
Add or remove a borrower from the loan. Changing who's on the mortgage doesn't alter who owns the property — that's what the title or deed is for — but it does affect who's on the hook for the home loan. Generally, if you want to remove someone from your home loan and that person is still living, you'll have to refinance; this could be necessary in a divorce, for instance. The person or people remaining on the loan will have to be able to qualify for the refi without that borrower. It's a similar drill for adding someone to the mortgage. That person will need to qualify along with the current borrower.
Is it worth it to refinance?
There isn’t a standard rule about when it makes sense to refinance your mortgage. Some experts recommend refinancing if you can lower your mortgage rate by 1% or more. But a smaller drop may still make sense for you. Crunch the numbers with this mortgage refinance calculator.
Keep in mind that your credit score affects the interest rate you're quoted. The higher your credit score, the lower the mortgage rate you'll be offered.
When deciding if you should refinance, consider how long you plan to live in your home. If you plan to move away soon, you might not have time to recoup the costs of refinancing, sometimes called the break-even point. You break even on a refinance when the money saved from refinancing outweighs how much you spent on closing costs. Note that if saving money isn't your refinancing goal — for example, if you're taking cash out — this isn't a helpful metric.
And ask your lender about any prepayment penalties. While these penalties aren’t common, some lenders may charge them if you close the loan within the first three to five years of a mortgage.
» MORE: When is a good time to refinance?
Learn more about refinancing your mortgage:
Compare mortgage refinance lenders
How does a refinance work?
Home equity loan or HELOC vs. cash-out refinance
As an expert in the field of mortgage refinancing, I bring years of experience and knowledge to the table. Having worked extensively with various lenders and staying abreast of the dynamic mortgage market, I can provide valuable insights into the process of finding and securing the best mortgage refinance rates.
Understanding Today's Mortgage Refinance Rates:
In the realm of mortgage refinancing, staying informed about current rates is crucial. NerdWallet’s comparison tool, as mentioned in the article, is a reliable resource for individuals seeking up-to-date information on refinance rates. The tool stands out for its ability to deliver personalized rate quotes quickly and without the need for a credit check, offering users a streamlined approach to exploring their options.
Factors Influencing Mortgage Refinance Rates:
Credit Score: Undoubtedly, the credit score is a pivotal factor in determining the refinance rate. As emphasized in the article, individuals looking to secure the best rates should regularly check their credit reports for errors and work on improving their credit scores by paying bills on time and maintaining a low credit utilization ratio.
Debt-to-Income Ratio (DTI): The debt-to-income ratio is another critical element, especially for conventional loan refinances. Lenders typically prefer a DTI of no more than 36%, ensuring borrowers have a manageable level of debt relative to their income.
Loan Type: The type of refinance chosen can impact the interest rate offered. Cash-out refinances are perceived as riskier by lenders due to borrowing against home equity, resulting in potentially higher interest rates compared to rate and term refinances.
Quote Comparison: To secure the best possible rate, the article recommends obtaining quotes from multiple refinance lenders. This involves comparing not only the interest rate but also the annual percentage rate (APR), estimated closing costs, and additional fees outlined in each Loan Estimate.
Rate Lock: The importance of locking in the refinance rate is emphasized. A rate lock ensures that the offered interest rate remains unchanged until the loan closes. Some lenders even offer a "float down" option to protect borrowers in case rates decrease before closing.
Understanding Mortgage Refinance Process:
The article provides a comprehensive overview of how a mortgage refinance works, including the following key points:
Loan Replacement: A mortgage refinance involves replacing the current home loan with a new one, requiring adherence to the lender's refinance requirements and completing the application and closing processes.
Costs Involved: While no down payment is required for refinancing, borrowers incur refinance closing costs, typically ranging from 2% to 6% of the new loan amount. These costs include the origination fee, appraisal, and discount points.
Time Frame: Refinancing is not an instantaneous process, taking at least four to six weeks. Factors such as underwriting and appraisal contribute to the time required for completion.
Payment Considerations: Even though no down payment is involved, refinancing is not without costs. Lenders offering no-closing-cost refinances may incorporate these costs into the total loan amount or charge a higher interest rate.
Determining When to Refinance:
The article outlines various reasons individuals might choose to refinance their mortgages, including:
Interest Rate Reduction: Refinancing to lower the interest rate, particularly when rates have dropped or credit scores have improved.
Loan Term Adjustment: Shortening the loan term, for instance, from a 30-year mortgage to a 15-year mortgage, to pay off the loan faster and reduce overall interest payments.
Home Equity Access: Utilizing a cash-out refinance to tap into home equity, providing funds for purposes such as major renovations.
Switching Loan Types: Transitioning from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for increased payment stability.
Private Mortgage Insurance (PMI) Elimination: Refinancing to eliminate PMI, especially if there's enough equity in the home.
Borrower Adjustments: Adding or removing a borrower from the loan, which may be necessary in situations like divorce.
Evaluating the Worth of Refinancing:
Determining whether refinancing is worthwhile involves considering factors such as the potential savings in monthly payments, the break-even point (when savings outweigh closing costs), and any prepayment penalties. The article recommends using tools like the mortgage refinance calculator to crunch the numbers and emphasizes the impact of credit scores on quoted interest rates.
In conclusion, my expertise in the mortgage refinance domain allows me to affirm the credibility and relevance of the information provided in the article. For those navigating the complexities of mortgage refinancing, a comprehensive understanding of the factors, processes, and considerations outlined here is essential for making informed decisions.