Today's Mortgage Refinance Rates -- January 1, 2021: Rates Start Off the Year Strong

Refinance rates start the year on a competitive note. Should you apply for a new mortgage today?

We're kicking off the new year with attractive mortgage refinance rates. Refinance rates tend to be a little higher than the rates you'll see for a new purchase mortgage, but they're still quite competitive. This is what they look like today:

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

30-year mortgage refinance rates

The average 30-year refinance rate today is 2.846%, down 0.005% from yesterday. At today's rate, you'll pay principal and interest of $413.24 for every $100,000 you borrow. That doesn't include added expenses like property taxes and homeowners insurance premiums.

20-year mortgage refinance rates

The average 20-year refinance rate today is 2.719%, down 0.005% from yesterday. At today's rate, you'll pay principal and interest of $540.88 for every $100,000 you borrow. Though your monthly payment will go up by $127.64 with a 20-year, $100,000 loan versus a 30-year loan of the same amount, you'll save $18,952.71 in interest over the course of your repayment period for every $100,000 you borrow.

15-year mortgage refinance rates

The average 15-year refinance rate today is 2.357%, up 0.004% from yesterday. At today's rate, you'll pay principal and interest of $659.84 for every $100,000 you borrow. Compared to the 30-year loan, your monthly payment will be $245.96 higher per $100,000 in mortgage principal. Your interest savings, however, will amount to $29,992.64 over the life of your repayment period per $100,000 of mortgage debt.

Should you refinance your mortgage right now?

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

First, if you extend your loan repayment term, you could end up paying a higher amount of total interest 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 period. You can avoid this 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'll need to consider closing costs, which are the upfront fees you're charged when you refinance a 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 specific amount of your mortgage, 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, it would take 2.5 years to break even. It's important to run the numbers and consider whether you'll stay in your home long enough for refinancing to pay off.

Generally speaking, refinancing can make a lot of sense if you don't intend to move within the next few years and you're able to reduce your mortgage's interest rate by at least 1%. Since mortgage refinance rates are now sitting near record lows, many borrowers will find that it's a good time to refinance. This especially holds true if you have a strong credit score and a low debt-to-income ratio, because that way, lenders are more likely to offer you the best rates they can give out.

If you're ready to refinance your home loan, reach out to a bunch of mortgage refinance lenders to get some offers. You may find that while one lender offers a lower interest rate on your refinance, another comes back with much lower closing costs. It's important to have several offers to compare so you can make sure you're getting the best possible deal.