by Christy Bieber | May 6, 2021
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Does refinancing make sense for you? Check out today's average mortgage refinance rates to help you decide.
Your mortgage is likely your largest monthly payment. If you can refinance to a new loan at a lower rate, you may be able to save money each month as well as over time. It's worth paying attention to mortgage refinance rates so you can decide if refinancing is right for you.
Here are today's average mortgage refinance rates for May 6, 2021.
|Mortgage Type||Today's Interest Rate|
|30-year fixed refinance loan||3.259%|
|20-year fixed refinance loan||3.057%|
|15-year fixed refinance loan||2.568%|
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The average 30-year mortgage refinance loan rate today is 3.259%, down 0.007% from yesterday's average of 3.266%. A refinance loan at today's average rate would come with a monthly principal and interest payment of $436 per $100,000 borrowed. Total interest costs would add up to $56,852 per $100,000 borrowed over the life of the refinance loan.
The average 20-year mortgage refinance loan rate today is 3.057%, down 0.022% from yesterday's average of 3.079%. You'd be looking at a principal and interest payment of $557 per $100,000 refinanced at today's average rate. During your entire loan repayment period, you'd pay total interest costs of $33,789 per $100,000 refinanced.
You should be able to save more money on interest over time by choosing a 20-year refinance loan rather than a 30-year loan. But since this loan option makes your monthly payments higher, you need to consider the opportunity cost of committing more money each month to paying off a mortgage rather than accomplishing other goals.
The average 15-year mortgage refinance loan rate today is 2.568%, down 0.002% from yesterday's average of 2.570%. At today's average rate, the monthly principal and interest payment would add up to $670 per $100,000 in refinanced mortgage debt. For each $100,000 you refinance at today's average rate, total interest costs would add up to $20,599.
This loan will save you the most money over time because of its short payoff time and the low interest rate. But many people will find committing to such large monthly payments isn't ideal because too little money will be left over for other things.
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 up-front 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.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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