Today’s mortgage refinance rates dip – September 6, 2021
Sept. 6, 2021
Multiple closely watched mortgage refi rates sunk lower today compared to a week ago.
30-year fixed refinance
The average 30-year fixed-refinance rate is 3.01 percent, down 6 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was higher, at 3.04 percent.
At the current average rate, you’ll pay $421.60 per month in principal and interest for every $100,000 you borrow.
You can use Bankrate’s mortgage calculator to get a handle on what your monthly payments would be and see the effect of adding extra payments. It will also help you calculate how much interest you’ll pay over the life of the loan.
15-year fixed refinance
The average rate for a 15-year fixed refi is 2.32 percent, down 5 basis points over the last seven days.
Monthly payments on a 15-year fixed refinance at that rate will cost around $384 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.
10-year fixed refinance
The average rate for a 10-year fixed-refinance loan is 2.25 percent, down 8 basis points over the last week.
Monthly payments on a 10-year fixed-rate refi at 2.25 percent would cost $377.67 per month for every $100,000 you borrow. If you can manage that substantial monthly payment, you’ll enjoy even more interest cost savings than you would with a 15-year term.
What does it mean to refinance your mortgage?
Refinancing your mortgage means taking out a new home loan. In the process, you’ll fully pay off your existing loan, and then start payments on a new one. The two most prevalent kinds of mortgage refinances are rate-and-term changes — which result in a new interest rate and a reset payment clock — and cash-out refinances. The latter allow homeowners to take advantage of their home equity by taking out a new mortgage with a larger principal based on the home’s current value.
30-year refi? 15-year refi? Which is right for me?
No matter what kind of refinance you choose, once you close on your new loan, the payment clock goes back to zero. For example, if you take out a new 30-year mortgage, you’ll have another 30 years of payments ahead of you.
That said, a 30-year mortgage refinance is the right choice for the majority of people. Extending the term of your loan means lower monthly payments, which can help if you have a tight budget.
A 15-year mortgage refinance has some advantages, too, namely that you pay a lot less interest over the life of the loan. 15-year mortgages tend to charge lower rates than 30-year mortgages, and they also have a shorter repayment window, so the overall savings can be significant. Remember, though, that a short repayment window is a double-edged sword. It does help you save in the long run, but with less time to pay, 15-year mortgages have higher monthly payments.
Here are sample payments on a $300,000 mortgage at 3 percent interest:
What does a mortgage refinance cost?
Refinance costs can change based on where you’re located, the lender you’re working with and a range of other factors. The general guidance, however, is that costs are around 2 to 5 percent of the loan’s principal amount. On a $300,000 mortgage, that equates to $6,000 to $15,000 in closing costs.
Can you save money with a refinance? Is now a good time to refi?
Yes, depending on your situation. Especially with mortgage rates around historic lows, it’s a great time to refinance. If you have a loan that you’ve been holding since before 2020, you’re almost guaranteed to be able to refinance to a lower-cost mortgage. That can mean significant savings each month and overall, so it’s worth looking into.
Remember, though, you’ll want to calculate your break-even timeline. If you’re planning to move soon, you may not save enough to make up for your closing costs before you do.
Where are refinance rates headed?
Since the beginning of the coronavirus pandemic in 2020, rates have been hovering around historic lows. Experts have been warning that this trend can’t last forever, and most expect rates to finish 2021 higher and on an upward trend.
In the near term, though, borrowers have caught another reprieve. With the Federal Housing Finance Agency’s announcement that it will end the 0.5 percent fee on most refinances, you can expect rates to hold steady or drop in the next few weeks.
Meanwhile, Federal Reserve policy seems poised to keep interest rates on bonds low, which could keep mortgage rates favorable into the fall.