by Christy Bieber | March 2, 2021
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Although mortgage refinance rates have been drifting up, many homeowners still have an opportunity to save.
On March 2, 2021, average mortgage refinance rates continued their upward trend. For many homeowners, however, there are still plenty of opportunities to save money by refinancing as rates remain low by historical standards.
|Mortgage Type||Today's Interest Rate|
|30-year fixed refinance loan||3.256%|
|20-year fixed refinance loan||2.976%|
|15-year fixed refinance loan||2.585%|
The average 30-year mortgage refinance loan rate today is 3.256%, up 0.024% from yesterday's average of 3.232%. A mortgage refinance loan at today's average interest rate would cost you $436 per $100,000 borrowed. Total interest costs would add up to $56,793 per $100,000 in refinanced mortgage debt over the life of the loan.
The average 20-year mortgage refinance loan rate today is 2.976%, up 0.015% from yesterday's average of 2.961%. If you refinance at today's average rate, you'd have a monthly principal and interest payment of $553 per $100,000 borrowed. For each $100,000 you refinance at today's average rate, total interest costs would add up to $32,815.
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When you refinance, consider your chosen loan repayment term carefully on your new loan. A shorter repayment timeline, such as a 20-year versus a 30-year, will mean more total interest savings over time but monthly payments will be higher. You'll need to decide if that tradeoff is worth it.
The average 15-year mortgage refinance loan rate today is 2.585%, up 0.009% from yesterday's average of 2.576%. A refinance loan at today's average interest rate would cost you $671 per $100,000 borrowed. Over the life of the loan, your total interest costs would add up to $20,744 per $100,000 in refinanced debt.
The 15-year mortgage refinance loan would save you even more in interest than the 20-year option, but monthly payments would be even higher since you're shortening your payoff timeline. If you can afford higher payments and becoming debt free ASAP is important to you, this option may be best.
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 the upfront fees you'll 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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