30-year mortgage rate falls back to 3% as pandemic rebounds

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Mortgage rates drifted down again this week, a move that entices homeowners to consider a refinancing. The average rate on a 30-year loan fell to 3  percent this week, down 4 basis points from last week, according to Bankrate’s latest survey of lenders.

The downturn in rates comes as coronavirus infections accelerate. Rates are just above their record low of 2.93 percent set in January. The 15-year fixed-rate mortgage fell to 2.28 percent. Bankrate’s averages include discount and origination points.

While the savviest homeowners refinanced, and some have even done so twice, millions more have yet to take advantage of rates that once would have seemed unthinkably low. Mortgage data firm Black Knight says 15 million American homeowners are in position to save by refinancing.

If you have a 30-year loan for $300,000 at 4 percent, your monthly payment is $1,432. Refinancing to 3 percent would cut the monthly payment to $1,265, a savings of $167 a month or $2,004 a year.

One caveat: Closing costs and fees mean it can cost you thousands of dollars to refinance. However, if you can cut your rate significantly, you’ll quickly recoup closing costs and fees.

Key takeaway
Make sure to shop around — you can save thousands of dollars by getting at least three bids.

How to refinance your mortgage

Step 1: Set a clear goal

Have a compelling reason to refinance. It could be cutting your monthly payment, shortening the term of your loan or pulling out equity for home repairs or to repay higher-interest debt. You may also want to roll your HELOC into a refi.

Step 2: Check your credit score

You’ll need to qualify for a refinance just as you needed to get approval for your original home loan. The higher your credit score, the better refinance rates lenders will offer you — and the better your chances of underwriters approving your loan.

Step 3: Determine how much home equity you have

Your home equity is the value of your home in excess of what you owe your mortgage lender. To find that figure, check your mortgage statement to see your current balance. Then, check online home search sites or get a real estate agent to run an analysis to find the current estimated value of your home. Your home equity is the difference between the two. For example, if you owe $250,000 on your home, and its value is $325,000, your home equity totals $75,000.

Step 4: Shop multiple mortgage lenders

Getting quotes from multiple mortgage lenders can save you thousands. Once you’ve chosen a lender, discuss when it’s best to lock in your rate so you won’t have to worry about rates climbing before your loan closes.

Step 5: Get your paperwork in order

Gather recent pay stubs, federal tax returns, bank statements and anything else your mortgage lender requests. Your lender will also look at your credit and net worth, so disclose your assets and liabilities upfront.

Compare refinance rates in your area now.

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Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
Edited by
Senior mortgage editor