Homeowners across the U.S are choosing to refinance their mortgages – and for good reason, too. There are often several benefits that can come with replacing your current home loan with a new one, from reducing your monthly payments to changing your type of loan (for example, switching from an adjustable rate loan to a fixed one).
However, before deciding to go and refinance your mortgage it’s often a good idea to find out how much your new rates would be, and if it’s worth replacing your existing loan.
Why refinance your mortgage?
Refinancing a home can often come with a number of advantages; from changing your loan to suit your current situation, to reducing the overall cost of your mortgage. Often, you’ll be able to:
- Switch the type of loan
- Lower your monthly payments (a recent study shows that the average homeowner could save $160 each month)
- Reduce the length of your mortgage
- Remove the PMI (private mortgage insurance), which can reduce your monthly payments (for homeowners with principal paid off, or property appreciation)
- Consolidate your first mortgage and HELOC (which stands for home equity line of credit), which can help to make your finances simpler and save cash
These are some of the most common benefits that can come with refinancing a mortgage – but make sure you do your research to make sure that you’re making the right decision before replacing your existing loan.
Current refinance rates
If you want to find out whether refinancing is the best option for you, taking the time to see how much more (or less) a new loan could cost you is often a great way to see if you could be saving cash by refinancing.
Generally, there are two main things to consider; the interest rates and the APR (which stands for annual percentage rate). Here are the current rates for refinancing a home loan:
Fixed rate mortgages
30 year interest rates: 4.250%
30 year APR: 4.323%
20 year interest rates: 4.125%
20 year APR: 4.225%
15 year interest rates: 3.875%
15 year APR: 4.002%
10 year interest rates: 3.990%
10 year APR: 4.172%
Adjustable rate mortgages
10 year interest rates: 5.125%
10 year APR: 5.193%
5 year interest rates: 4.375%
5 year APR: 4.995%
3 year interest rates: 4.875%
3 year APR: 5.061%
Keep in mind that other factors could affect your rates, so you may want to take those into consideration as well.
What can affect your rates?
In most cases, the rates aren’t set in stone – and there are quite a few things that could affect how much you’ll have to pay on your mortgage if you refinance it. While it can often benefit individuals to replace their original home loan, there are times where doing so might end up costing more, which is why it’s often best to find how much you might be looking to pay.
It can be important to take a look at your credit score over anything else, as this can often have quite a large impact on the interest rates you’ll have to pay. The better your credit score is, the lower your rates are likely to be. So, if your score has improved since you took out a mortgage, refinancing may be a good idea. On the other hand, if you’re credit score has dropped since then, you may not want to replace your current loan, as the lower score might end up costing you more in interest rates.
Generally, the best thing you can do is calculate the numbers to see which option will be right for you. While refinancing can be great for many people, it may not be for you – and if you don’t feel it’s a good idea, you may want to stick with what you’ve got.