Refinancing a mortgage can be beneficial in a range of ways, which is one of the main reasons why it’s become so popular among homeowners in the U.S to do just that. In simple terms, if you refinance your current home loan, you will be replacing your existing mortgage with a new one. From reducing your interest rates, to shortening the length of your loan; many find refinancing to be a great idea.
If you’re considering refinancing, you may be wondering how much the rates are for the average 30 year home loan of today.
The interest and APR rates
Generally, you’ll need to consider both the APR (annual percentage rate, which tends to include the fees and costs) and the interest rate before refinancing, to make sure that replacing your existing mortgage is the right move.
If you choose the same duration for your new loan and find that your costs will be more, you may be better off sticking to your current mortgage. On the other hand, if you can get a good deal and save yourself some cash, refinancing may not be a bad idea.
At the time of writing, you’ll be looking at 4.345% on the annual percentage rate and 4.250% on the interest rate, although your current situation may have an impact on this.
If you’ve been paying off a 30 year loan for 10 years and choose to refinance your mortgage, it’s likely to reset back to the original term – so you’re likely to be making your payments for 30 years on top of the 10 you’ve already been paying. If you don’t want this, it may be a good idea to choose a shorter term for your new loan instead.
What can affect the rates of a refinanced mortgage?
There are quite a few things that could increase or decrease the overall amount you’ll have to pay on your new loan – and finding out what they are and how they could affect your rates can often be important before going and replacing your current home loan. Some of the things that could raise or reduce your prices are:
Your credit score
In most cases, your credit score can have quite an impact on the overall rates you’ll have to pay, which is why taking yours into consideration when deciding whether to replace your current loan can often be crucial to ensure that you don’t end up paying higher rates.
Generally, you’ll have a lower monthly payment to deal with if you’re credit score has improved over time, and higher rates if it has dropped. This is because your score often plays a large role in how much you’ll be paying for your mortgages interest rate – as well as your chances of replacing your existing loan.
If you have a less-than-perfect credit score, but still want tore finance your loan; taking the time to try and improve your score before getting a new home loan may not be a bad idea.
Private mortgage insurance
In most cases, your private mortgage insurance (commonly abbreviated to PMI) will be adding to your home loan’s overall rates – and in some cases, you could cut this cost out entirely by refinancing your home loan.
With a good deal of principal paid off or property appreciation, you might be able to say goodbye to the additional cost of the PMI, which can generally lessen the costs of your monthly payments.
How much can you save on average?
Many people get lower rates on their mortgage by choosing to replace their current home loan with a new one – but how much do people tend to save by refinancing? While it can often vary from homeowner to homeowner, a recent study showed that on average, people tend to save around $160 on their monthly repayments.