Current Mortgage Refinance Rates -- August 26, 2021: Rates Tick Down

Is it a good time to refinance your mortgage?

On Aug. 26, 2021, average mortgage refinance rates are unchanged for the 30-year loan and down slightly for the 15-year and 20-year loans. These are average rates a typical borrower would pay. Although your rates will be determined by your own financial credentials, these numbers can still give you an idea of what it would cost to refinance.

Check out today's average rates for Thursday, Aug. 26, 2021 to see if you could drop your interest rate compared with your current home loan:

Data source: The Ascent's national mortgage interest rate tracking.

30-year mortgage refinance rates

The average 30-year mortgage refinance loan rate today is 3.109%, unchanged from yesterday's average. A loan at today's average rate would cost you $428 per month in principal and interest for each $100,000 you refinance. Total interest costs would add up to $53,902 per $100,000 borrowed over the life of the refinance loan.

20-year mortgage refinance rates

The average 20-year mortgage refinance loan rate today is 2.828%, down 0.001% from yesterday's average of 2.829%. A refinance loan at today's average rate would come with a monthly principal and interest payment of $546 per $100,000 borrowed. Your total interest costs over the life of the refinance loan would equal $31,046 per $100,000 borrowed.

The interest savings on this one is higher than the 30-year refinance loan. You won't pay interest for as long, and you'll also be charged a lower rate. However, by reducing your repayment time by a decade, you are forced to make higher monthly payments which may strain your budget.

15-year mortgage refinance rates

The average 15-year mortgage refinance loan rate today is 2.380%, down 0.005% from yesterday's average of 2.385%. For each $100,000 refinanced at today's average rate, your total monthly principal and interest payment would be $661. Over the life of the refinance loan, you'd pay total interest costs of $19,008 per $100,000 borrowed.

This loan provides the most interest savings over time, so you should choose it if your priority is to keep total mortgage repayment costs as low as possible. Just be aware the tradeoff is that your monthly payments are much higher while you are making them, which could reduce your budget flexibility and make it more difficult to afford your loan.

Should you refinance your mortgage right now?

Refinancing your mortgage can be a smart financial decision if you're able to reduce your interest rate and lower your monthly payments by securing a new home loan. However, there are a few key things to think about before you refinance.

First, if you extend your loan repayment term, you could end up paying higher total interest costs over time than with your existing mortgage. This can occur even if you qualify for a lower interest rate since you'd be paying interest over a longer time. You can avoid this issue by choosing a refinance loan with a shorter repayment term. Or you may decide you're willing to pay more interest over the life of your loan in exchange for a reduced monthly payment.

Second, you will have to consider closing costs, which are the upfront fees you'll be charged when you refinance your mortgage. The Ascent's research revealed that closing costs on a refinance loan for a median value home total anywhere from $5,000 to $12,500. However, your closing fees will depend on the amount of your home loan, your location, and your lender.

You should eventually make up for these closing costs due to your lower monthly payments -- but that can take time. If you save $200 per month by refinancing and pay $6,000 in closing costs, you would take 2.5 years to break even. It's important to do the math and consider whether you'll stay in your home long enough for refinancing to pay off.

In general, it is a good idea to refinance if you don't plan to move in the next few years and you can reduce your mortgage interest rate by 1% or more. With mortgage refinance rates near record lows, many borrowers will find it's a good time to refinance. Compare rates from the best mortgage refinance lenders to get some personalized offers and decide whether securing a new home loan now is right for you.