by Christy Bieber | Feb. 19, 2021
Mortgage refinance rates went up on Feb. 19. How could this affect you if you're thinking about refinancing?
On Feb. 19, 2021, average mortgage refinance rates went up, with the 30-year refinance rate moving above 3.00%. While this isn't the best news for homeowners, it's important to know that rates still remain close to historic lows. In many cases, it will be possible to cut your mortgage loan payment considerably by refinancing at today's average rates.
Take a look at today's average mortgage refinance rates to see how they compare to your current interest rate so you can decide if refinancing makes sense for you.
|Mortgage Type||Today's Interest Rate|
|30-year fixed refinance loan||3.016%|
|20-year fixed refinance loan||2.774%|
|15-year fixed refinance loan||2.425%|
The average 30-year mortgage refinance loan rate today is 3.016%, up 0.029% from yesterday's average of 2.987%. At today's average rate, you'd pay $422 per month in principal and interest per $100,000 in mortgage debt you refinance. Total interest costs would add up to $52,088 per $100,000 in debt over the life of the refinance loan.
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The average 20-year mortgage refinance loan rate today is 2.774%, up 0.037% from yesterday's average of 2.737%. A refinance loan at today's average rate would come with a monthly principal and interest payment of $543 per $100,000 borrowed. Over the life of the refinance loan, your total interest costs would add up to $30,405 per $100,000 borrowed.
The amount of interest you'd save by choosing a 20-year loan over a 30-year loan is considerable. Of course, you will have to pay more each month when you reduce your payment time by 10 years. Consider how this would affect your budget when you decide which refinance loan is right for you.
The average 15-year mortgage refinance loan rate today is 2.425%, up 0.021% from yesterday's average of 2.404%. A refinance loan at today's average interest rate would cost you $663 per $100,000 borrowed. The total costs of interest would add up to $19,388 per $100,000 in debt refinanced at today's average rate.
With a 15-year loan, you save even more interest than with a 20-year refinance loan. But of course monthly payments are even higher too because you're making so many fewer payments. Refinancing to a 15-year loan could be the best choice if you want to save as much as possible on interest, but you do need to consider how these higher payments can affect your other goals.
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 upfront fees you'll need 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 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.
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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