Today's Mortgage Refinance Rates -- January 21, 2021: Rates Fall on Refinance Loans

On Jan. 21, mortgage refinance rates declined. Here's what you should know about average rates today if you're considering refinancing.

As we move towards the end of the month, mortgage refinance rates fell slightly on Jan. 21, 2021. Here's what you should know about mortgage refinance rates today if you are thinking about getting a new home loan with the goal of reducing your interest rate and monthly payment.

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 2.937%, down 0.004% from yesterday's average of 2.941%. A refinance loan at today's average rate would cost you $418 per month in principal and interest for each $100,000 you borrow. Your total interest costs over the life of the loan would equal $50,557 per $100,000 borrowed.

20-year mortgage refinance rates

The average 20-year mortgage refinance loan rate today is 2.772%, down 0.013% from yesterday's average of 2.785%. Refinancing at today's average rate would leave you with a monthly principal and interest payment of $543 per $100,000 in mortgage debt. The total costs of interest would add up to $30,381 per $100,000 borrowed at today's average rate.

Refinancing to a 20-year loan can provide more total interest savings than a 30-year loan option because you won't pay interest for as long. But since you're making fewer monthly payments, each one will be higher than with the 30-year loan. Depending on your current rate and repayment term, you may not be able to drop your payment as much by choosing the 20-year refinance loan but you could potentially save a lot on interest over the life of the loan.

15-year mortgage refinance rates

The average 15-year mortgage refinance loan rate today is 2.406%, down 0.001% from yesterday's average of 2.407%. A mortgage refinance loan at today's average interest rate would cost you $662 per $100,000 borrowed. During your entire loan repayment period, you'd pay total interest costs of $19,227 per $100,000 borrowed.

With a 15-year refinance loan, you're choosing a much shorter repayment timeline than with the 20-year or 30-year loan. Your total interest savings are substantial, but you will end up with a much higher monthly payment with this loan option than with either of the refinance loans carrying longer terms. You'll need to consider whether you'd prefer a higher payment in exchange for more interest saved in total.

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 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.