Current Mortgage Refinance Rates -- January 5, 2021: Rates Are Down

What happened with mortgage refinance rates today? Find out here.

As a New Year gets underway, mortgage refinance rates fell slightly for all loans and are still near record lows. If you're considering refinancing your home loan, here's what you need to know about average refinance rates for Jan. 5, 2021.

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

30-year refinance rates

The average 30-year mortgage refinance loan rate today is 2.837%, down 0.009% from yesterday's average of 2.846%. At today's average rate, you'd pay $413 per month in principal and interest per $100,000 borrowed. This doesn't include property taxes and insurance. Over the life of the loan, you'd pay total interest costs of $48,631 per $100,000 borrowed.

20-year refinance rates

The average 20-year mortgage refinance loan rate today is 2.710%, down 0.01% from yesterday's average of 2.720%. For each $100,000 borrowed at today's average rate, your monthly principal and interest payment would add up to $540. Total interest costs would add up to $29,646 per $100,000 borrowed over the life of the loan.

A 20-year refinance loan has a higher monthly payment than the 30-year alternative since you have a decade less time to pay your loan off in full. However, the interest savings is considerable due to the shorter repayment timeline. Weigh your options carefully and decide whether you'd prefer to pay more each month to become debt free faster or get a lower monthly payment but make your total loan costs higher.

15-year refinance rates

The average 15-year mortgage refinance loan rate today is 2.333%, down 0.022% from yesterday's average of 2.355%. At today's average rate, the monthly principal and interest payment would add up to $659 per $100,000 in mortgage debt. The total costs of interest would add up to $18,612 per $100,000 borrowed at today's average rate.

Like the 20-year refinance loan, choosing a 15-year loan option also means you're agreeing to make higher monthly payments than with longer term loans -- but you're maximizing your interest savings. If you can afford the higher payments without compromising other goals, it may be worth it.

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.