Will 30-year refinance rates increase?

Mortgage rates hit record lows in early 2021. Economists expect mortgage rates to rise as the economy improves. However, the trajectory of mortgage rates is notoriously difficult to predict.

Why comparing rates is important

Mortgage rates and closing costs can vary widely from lender to lender, so it’s important that you shop around before. In a report published in 2018, mortgage giant Freddie Mac said borrowers could save an average of $1,500 over the life of the loan by getting one additional rate quote, and an average of $3,000 by seeking out five quotes.

Top 5 Bankrate 30-year refinance lenders

• Better.com – Best online lender
• Cardinal Financial Company – Best for low-credit score borrowers
• Interfirst Mortgage Company – Best non-bank lender
• LoanDepot – Best no-fee lender

AmeriSave Mortgage Corporation – Best overall

Methodology

Bankrate helps thousands of borrowers find mortgage and refinance lenders every day. To determine the top mortgage lenders, we analyzed proprietary data across more than 150 lenders to assess which on our platform received the most inquiries within a three-month period. We then assigned superlatives based on factors such as fees, products offered, convenience and other criteria. These top lenders are updated regularly.

Better.com – Best online lender

Better.com, also known as Better Mortgage, is an online mortgage lender available in the majority of states offering 30-year purchase and refinance options. The lender is one of Bankrate’s picks for best mortgage lenders overall, as well as best lenders for refinancing and cash-out refinancing.

Strengths: Like most mortgage lenders, Better.com can do rate-and-term and cash-out refinancing. You can receive a refi rate quote in seconds online, and take advantage of an on-demand rate-lock. The lender also doesn’t charge an origination fee.

Weaknesses: You won’t be able to refinance a VA or USDA loan.

Read Bankrate's Better.com mortgage review

Cardinal Financial Company – Best for low-credit score borrowers

Cardinal Financial Company, which also operates as Sebonic Financial, offers the full suite of refinance options, including rate-and-term, cash-out and streamline.

Strengths: Cardinal Financial’s proprietary system Octane allows you to easily compare refinance rates and follow a customized to-do list to keep the refi process on track. Depending on loan product, the lender accepts credit scores as low as 550, 580 or 620.

Weaknesses: You’ll have to go through a loan officer to get set up with Octane and find out what rates you’ll qualify for.

Read Bankrate's Cardinal Financial Company mortgage review

Interfirst Mortgage Company – Best non-bank lender

Interfirst Mortgage Company (Chicago Mortgage Solutions LLC) is a direct, wholesale and correspondent lender available in 24 states and Washington D.C.

Strengths: An Interfirst Mortgage Company loan officer guides you through the application process, and according to the lender’s website, it takes just a few minutes to obtain a refinance rate quote. The lender also boasts faster-than-industry-standard closing timelines.

Weaknesses: Interfirst Mortgage Company isn’t available in every state, and you’ll need to connect with a loan officer to get quotes.

Read Bankrate's Interfirst Mortgage Company reviews

LoanDepot – Best no-fee lender

LoanDepot offers conventional, FHA and VA loans through both branch locations (more than 200 nationwide) and online. It is currently one of Bankrate’s best cash-out refinance lenders.

Strengths: LoanDepot rewards borrower loyalty with its Lifetime Guarantee: After you refinance with the lender the first time, you won’t have to pay lender or appraisal fees on any additional refinances. In addition, if your credit needs some work or if you’re underwater on your mortgage, the lender has refi options that can help.

Weaknesses: You can’t compare daily interest rates online, unlike some competitors.

Read Bankrate's LoanDepot review

AmeriSave Mortgage Corporation – Best overall

AmeriSave Mortgage Corporation is an online mortgage lender — one of Bankrate’s top picks in the space — licensed in 49 states.

Strengths: AmeriSave Mortgage Corporation offers rate-and-term and cash out refinancing with fast prequalification and turnaround times (“days, not weeks,” according to the lender’s website). Notably, the lender promises to match both the rate and closing costs of a competitor through its Rate Match Guarantee program (or pay you $500).

Weaknesses: AmeriSave Mortgage Corporation charges a $500 non-refundable application fee. AmeriSave Mortgage Corporation review

What you need to know about 30-year mortgage refinances

What is a 30-year fixed refinance mortgage?

A 30-year fixed-rate mortgage is the most common type of loan. It has a set rate, which keeps your principal and interest payments stable.

Refinancing with a 30-year loan lets you pay off and replace your existing loan with a new, longer-term loan and a different rate. There are several reasons to refinance into this type of loan, including reducing your monthly payment, lowering your mortgage rate or changing the type of loan you currently have.

When should you consider a 30-year refinance?

There are two common reasons to refinance: to reduce monthly mortgage payments or to save on the overall interest you pay on your house over the long term. In some cases, refinancing will accomplish both of those goals, but not always. With rates at record lows, millions of homeowners could benefit from refinancing. Here are a few things to consider when deciding if it's the right time to refinance:

• The purpose of the refinance: Extending the length of your loan will lower your monthly payments while increasing the interest you pay over the life of the loan. Shortening the length of the loan will lower the interest you pay over the life of the loan but often increases your monthly payments. It's important to know what you want to accomplish when deciding whether or not it’s time to refi.
• How long you'll be in the home: Refinancing generally only makes sense if you plan to spend several more years in your home. It can sometimes take years to break even on the cost of refinancing. If you won’t be in your home for much longer, it might not make sense to refinance.
• Your ability to qualify: Refinancing might make sense for you, but that doesn't necessarily mean you'll qualify. Lenders take into account a number of factors when considering whether to extend you a refinance offer, including the amount of equity you currently have in the home, your income and your credit score.

Of course, there are other reasons for choosing to refinance. A common reason is to tap into home equity. If you have enough equity in your home (at least 20 percent), you can use a cash-out refinance to pay for expenses such as home improvements, to get rid of credit card debt or to pay for emergencies. Opting for a 30-year cash-out refinance not only provides a chunk of cash for major expenses, but it also frees up cash.

A 30-year refinance term presents many benefits. But whether it makes sense for you to refinance into a longer or shorter term depends on your financial situation.

Refinancing into a 30-year term from a shorter term — say, a 15-year fixed-rate term — can be worthwhile if you're interested in lowering your monthly payment. It's even more favorable if you can lock in a lower interest rate and improve your financial situation in some way.

For example, let's say you have a 15-year mortgage loan of $100,000 at an interest rate of 5 percent. Your monthly principal and interest payments would be $791. If you were to refinance your loan into a 30-year mortgage at a rate of 3.5 percent, you'd lower your monthly payments by nearly $350. That calculation doesn't include expenses like property taxes, homeowner's insurance or HOA fees, or closing costs including points, but it emphasizes how refinancing into a longer term can free up monthly cash flow.

It’s important to keep in mind that refinancing into a longer term will increase the interest you pay over the life of the loan, since you're essentially starting your loan from scratch. In addition, you may have to pay lender origination fees, third-party fees for appraisal and closing costs. These expenses will increases the cost of the loan even further.

Using a refi to get a shorter term would save you from paying additional interest costs and potentially lower your interest rate. It could, however, boost the overall monthly payment of your loan.

Pros and cons of a 30-year fixed refinance loan

Pros of a 30-year refi:

• Lower monthly payments: By stretching out the loan over three decades, you get lower monthly payments compared with shorter loan terms.
• Provides more monthly cash flow: If you need money to pay down student loans or invest, the 30-year fixed gives you the most flexibility.
• Plenty of choices: The 30-year fixed is the most popular type of mortgage, so there’s no shortage of lenders and loan programs to choose from.

Cons of a 30-year refi:

• More total interest paid over the life of the loan: Those lower payments come with a downside — you’re paying a lot of interest over the term of a 30-year loan.
• Longer terms have slightly higher mortgage rates overall: Lenders are taking on more risk by extending a rate for three decades, so 30-year loans carry higher interest rates than 15-year loans.
• It takes longer to gain equity: A 30-year repayment schedule means you’re paying down the balance at a slower pace so not only will it take longer to build equity but the interest paid each month will also decline at a slow pace.

Learn more about 30-year mortgage refinancing

• Calculate your potential refinance savings
• How to refinance your mortgage
• How to get the best refinance rate
• Compare mortgage lenders