Current Mortgage Refinance Rates -- December 31, 2020: Rates Are Down

Is it a good time to refinance as the year draws to a close? Find out here.

On the last day of 2020, mortgage refinance rates fell for all loans and they remain competitive. Many current homeowners could reduce their monthly payment and cut total interest costs by refinancing, but it's important to make the best choice for your overall financial situation.

To help you decide if now is a good time to refinance, check out today's average mortgage refinance rates for Dec. 31.

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 2.851%, down 0.011% from yesterday's average of 2.862%. You'd be looking at a principal and interest payment of $414 per $100,000 borrowed at today's average rate. This doesn't include the cost of property taxes or insurance. During your entire loan repayment period, you'd pay total interest costs of $48,900 per $100,000 borrowed.

20-year mortgage refinance rates

The average 20-year mortgage refinance loan rate today is 2.724%, down .009% from yesterday's average of 2.733%. If you borrow at today's average rate, you'd have a monthly principal and interest payment of $541 per $100,000 borrowed. You'd be looking at total interest costs of $29,812 per $100,000 in mortgage debt over the life of the loan.

The monthly payments on a 20-year refinance loan exceed the monthly payments on a 30-year refinance loan even though the average interest rate is lower. However, total interest costs over the life of the loan are reduced with the shorter term loan. When you borrow for less time, your interest costs decline but your monthly payment goes up since you have a shorter period to pay off your loan in full.

15-year mortgage refinance rates

The average 15-year mortgage refinance loan rate today is 2.353%, down 0.003% from yesterday's average of 2.356%. At today's average rate, the monthly principal and interest payment would add up to $660 per $100,000 in mortgage debt. The total costs of interest would add up to $18,780 per $100,000 borrowed at today's average rate.

A 15-year refinance loan comes at a much lower interest rate than its longer counterparts. And total interest costs are lower both because of the reduced rate and because of the short repayment timeline. Your monthly payment is higher, though, since you have so many fewer payments to make to repay your balance in full.

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. There are upfront fees to pay 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 1.) you don't plan to move in the next few years and 2.) 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.