What is mortgage refinance?

A refinance allows you to pay off your old loan and replace it with a new mortgage at a new term and a new rate. This can lower your monthly payments and potentially allow you to pay off your mortgage faster. The refinance process is similar to the process of applying for a mortgage to buy a home. You’ll need to meet the lender’s criteria around credit score and debt, as well have your home appraised. You’ll also need to pay closing costs, although these are typically significantly less than they are for a purchase loan.

What are the requirements for refinancing a mortgage?

To refinance your existing loan, you’ll need to meet strict requirements, provide a bunch of paperwork and ensure you’ve built up enough equity in your home, especially if you want to take cash out. Here are some of the things your lender will likely want to see: Identification Pay stubs Tax returns Proof of assets, including bank statements and brokerage account statements Loan statements Requirements vary, so talk to your lender about their credit score standards and the documentation you need to supply early. The sooner you can submit your documents, the faster you’ll get to closing. You’ll also need to make sure you have enough equity for the kind of loan you’re considering. For a cash-out refinance, most lenders require you to have a minimum of 20 percent equity in your home. For a rate-and-term refinance, the equity requirement will vary by lender, but you’ll most likely need to continue paying PMI, even after a refinance, if your new loan is worth more than 80 percent of your home’s total value.

Are refinance rates higher than mortgage rates to purchase a home?

The rates on refinances compared to purchase loans might vary somewhat, but overall, they’re comparable. You might notice slightly higher refinance rates when they’re in demand. Experts don’t recommend trying to time the market — in other words, waiting for rates to drop — as there are so many variables that can affect rates, making it difficult to accurately predict whether they’ll rise or fall. If you find a rate that will save you money, then it’s a good idea to lock it in so you don’t risk missing out if rates jump.

Types of refinance loans

Rate-and-term refinance With a rate-and-term refinance, borrowers can reduce their interest rate, lower their monthly payments (by extending their loan or through that new rate, or both) or shorten their term (which usually raises monthly payments) in order to pay off the loan faster. A shorter loan term can also save you lots of money in interest. Cash-out refinance A cash-out refinance allows you to tap your equity by refinancing your mortgage. Because you're withdrawing cash from your home’s value, the new mortgage amount will be higher than your current loan. Lenders typically limit cash-out refinances to no more than 80 percent of your home’s value so that you still have some equity left in your home. Sometimes lenders will also charge higher interest rates because the loan amount is increasing. Between a larger mortgage and higher interest rate, make sure you run the numbers before you try to cash out. Cash-out refinances can meet many financial needs, such as financing home improvements, consolidating high-interest debt or paying for a child’s college education. Streamline refinance A streamline refinance is a product for government-backed loans (either an FHA streamline, VA streamline or USDA streamline). The advantage of streamline refinancing is that there are minimal credit requirements and the loan processing is typically fast. A streamline refinance can also be less expensive than conventional refinancing. Some lenders offer streamline refinances with no upfront costs wherein the lender will pay some or all of the closing costs in exchange for a higher interest rate. Learn more about the types of refinancing.

How much does it cost to refinance?

Closing costs for refinancing your mortgage can run thousands of dollars, usually between 2 percent and 5 percent of the loan amount. These costs also vary by where you live and the lender you choose.

How can I get the best mortgage refinance rate?

Shopping around for quotes is key for every mortgage applicant. When you shop, consider not just the interest rate, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Some lenders offer lower closing costs and fees than others, or your current bank or credit union might extend you a special offer. Don’t be afraid to walk away from your current lender if you find a better deal elsewhere. Consider working with a mortgage broker, who can help you compare offers from several lenders.

Should you refinance your mortgage?

You should refinance if doing so will help you to save money, build equity or pay off your mortgage faster. For example, if interest rates have dropped since you closed your mortgage, you could do a rate-and-term refinance to obtain a lower rate. In addition to a lower rate, you could save by eliminating PMI, or tap your home’s equity via a cash-out refinance. When rates are low, however, it’s important to consider your future plans. If you expect to sell your home in the foreseeable future, for instance, it might not make sense to start over with a new loan.

Compare today’s refinance rates

Written by

Jeff Ostrowski

Reviewed by

Greg McBride, CFA

On Wednesday, October 04, 2023, the national average 30-year fixed refinance APR is 8.08%. The average 15-year fixed refinance APR is 7.21%, according to Bankrate's latest survey of the nation's largest refinance lenders.

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.

National mortgage interest rate trends
Mortgage refinance industry insights
How does mortgage refinancing work?
Common reasons why to refinance your mortgage
How to refinance your mortgage
Pros and cons of refinancing
Mortgage refinance FAQ

Weekly national mortgage interest rate trends

Current refinance rates

	30 year fixed refinance	7.98%
	15 year fixed refinance	7.05%
	10 year fixed refinance	6.88%
	5/1 ARM refinance	6.69%

Mortgage refinance industry insights

Rock-bottom rates made the decision to refinance a no-brainer in 2020 and 2021. Those days are long past. Mortgage rates are now at their highest point since the year 2000, and as a result, refinances make up just a small share of loans today. These have been mostly cash-out refinances, a type of loan that replaces your existing loan with a new, bigger mortgage including the balance of the first plus a portion of your home’s equity as cash.

How will mortgage refinance rates change in the short term? See Bankrate’s expert rate trend predictions.

Current mortgage and refinance interest rates

Product	Interest Rate	APR
30-Year Fixed Rate	7.88%	7.90%
20-Year Fixed Rate	7.84%	7.87%
15-Year Fixed Rate	7.04%	7.09%
10-Year Fixed Rate	6.96%	7.00%
5-1 ARM	6.70%	8.16%
10-1 ARM	7.24%	8.18%
30-Year Fixed Rate FHA	7.17%	8.10%
30-Year Fixed Rate VA	7.40%	7.53%
30-Year Fixed Rate Jumbo	7.92%	7.94%

Rates as of Wednesday, October 04, 2023 at 6:30 AM

Product	Interest Rate	APR
30-Year Fixed Rate	8.06%	8.08%
20-Year Fixed Rate	8.10%	8.12%
15-Year Fixed Rate	7.17%	7.21%
10-Year Fixed Rate	6.95%	6.99%
5-1 ARM	6.78%	7.99%
10-1 ARM	7.31%	8.18%
30-Year Fixed Rate FHA	7.23%	8.19%
30-Year Fixed Rate VA	7.36%	7.58%
30-Year Fixed Rate Jumbo	8.13%	8.15%

Rates as of Wednesday, October 04, 2023 at 6:30 AM

Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).

For Bankrate’s overnight averages, APRs and rates are based on no existing relationship or automatic payments. To determine the Bankrate Monitor mortgage rate averages, Bankrate collects APRs and rates from the 10 largest banks and thrifts in 10 large U.S. markets based on no existing relationship or automatic payments.

Our advertisers are leaders in the marketplace, and they compensate us in exchange for placement of their products or services when you click on certain links posted on our site. This allows us to bring you, at no charge, quality content, competitive rates and useful tools.

Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.

How does mortgage refinancing work?

When you refinance your mortgage, you’re replacing your existing loan with a new one. The process is similar to applying for a purchase mortgage: You’ll submit to a credit check and financial review, and possibly pay for an appraisal. When you close, your new lender will pay off your original mortgage. You’ll then make monthly payments on the new loan.

You might use a different lender for a refinance than the one you worked with in the past, especially if you’re looking to save on costs. Refinancing isn’t cheap: The closing costs can equal anywhere from 3 percent to 5 percent of the amount of the loan. (You won’t pay as much as you did when you bought your home, however.)

Common reasons why to refinance your mortgage

You might refinance your mortgage to save money on monthly payments, pay off your loan faster or take out cash. You might decide refinancing makes sense if you can:

Lower your interest rate: If interest rates have dropped since you first obtained your mortgage, a rate-and-term refinance can provide you with a lower rate.
Consolidate high-interest debt: You can use a cash-out refinance to tap your home’s equity and lower or pay off high-interest debt. Whether it’s credit card balances or other forms of debt, using the cash-out funds could save you several thousands of dollars in interest.
Eliminate private mortgage insurance: If your home’s value has increased, you could refinance to get out of paying private mortgage insurance (PMI) on a conventional loan or mortgage insurance premiums (MIP) on an FHA loan.
Change your loan term: If you’re struggling to make your monthly mortgage payments, you can refinance to get a longer loan term, which might translate to a smaller monthly payment. If you want to pay down the mortgage faster, you could refinance into a 15- or 20-year loan.

How to refinance your mortgage in 5 steps

If you can get an adequately lower rate, refinancing can save you a substantial amount in interest charges, but it does require some work. The steps include:

1. Check your credit score

A better credit score will help you secure a better rate and make your refinance even more cost-effective. If you're not happy with your credit score or the rates you're being quoted, work on boosting your credit first, then try to refinance again once you've improved it. Typically, mortgage lenders want to see a credit score of 620 or better for a refinance, but there are some refinance options if you have poor credit, including streamline programs. You can improve your credit score by reducing your credit utilization ratio (the proportion of credit you’re using compared to your credit limit) and paying down your highest-interest or highest-payment debt.

2. Calculate the cost vs. savings of refinancing

One of the most important factors in refinancing is figuring out your break-even timeline. A refi usually comes with upfront costs at the closing, just like an initial mortgage, and those can add up. If you're not planning to stay in your current home for more than a few years, the savings you get from a lower rate might not outweigh those costs before you move. Bankrate's refinance breakeven calculator can help you figure out this timeline.

3. Find the best refinance rates today

It's just as important to shop around when you refinance as it was when you applied for your first mortgage. Explore refinance offers from at least three mortgage lenders (your bank or current lender might be good places to start), and keep an eye on rates while you comparison-shop — this can help you decide when to lock in a rate. Check out Bankrate's lender reviews, as well, to help guide your decision.

Compare the best mortgage refinance lenders.

4. Get your paperwork in order

Once you've identified a lender, find out what paperwork you need in order to complete a refinance application. Among the requirements, your lender will want to review tax returns, pay stubs, W-2s and other proof of income, as well as documentation about any assets such as savings.

5. Prepare for closing on your mortgage refinance

Refinancing isn't quite as hard as shopping for a house, but it still takes some time. While your new loan is processing, don't open new credit accounts or make other large purchases. Doing so can derail your application.

Here’s how to get the best refinance rate.

Pros and cons of refinancing

Refinancing can be a smart move, whether it helps you secure a lower rate or tap your home equity to fund a home renovation or other project through a cash-out deal.

Pros of mortgage refinance

You can lock in a lower rate by refinancing, which can reduce your monthly payments and put some money back in your budget.
If your home’s value has increased, you might be able to stop paying PMI, which will also lower your monthly expenses. PMI should end automatically once you get to at least 20 percent equity owned free and clear, but it’s usually a good time to consider a refinance once that happens, too.
If you need money for renovations, a cash-out refi offers relatively cheap capital. It can make your monthly payments more expensive, but home improvements tend to boost your equity value even more.

Cons of mortgage refinance

Refinancing costs money. Closing costs can total 2 percent to 5 percent of the amount of the mortgage, which is why it’s so important to make sure you’ll recoup those costs before you move.
If you refinance from a 30-year loan to another 30-year loan, you’ll extend your repayment period. A new loan restarts the repayment clock.

Mortgage refinance FAQ

A refinance allows you to pay off your old loan and replace it with a new mortgage at a new term and a new rate. This can lower your monthly payments and potentially allow you to pay off your mortgage faster. The refinance process is similar to the process of applying for a mortgage to buy a home. You’ll need to meet the lender’s criteria around credit score and debt, as well have your home appraised. You’ll also need to pay closing costs, although these are typically significantly less than they are for a purchase loan.
To refinance your existing loan, you’ll need to meet strict requirements, provide a bunch of paperwork and ensure you’ve built up enough equity in your home, especially if you want to take cash out. Here are some of the things your lender will likely want to see:
- Identification
- Pay stubs
- Tax returns
- Proof of assets, including bank statements and brokerage account statements
- Loan statements
Requirements vary, so talk to your lender about their credit score standards and the documentation you need to supply early. The sooner you can submit your documents, the faster you’ll get to closing.

You’ll also need to make sure you have enough equity for the kind of loan you’re considering. For a cash-out refinance, most lenders require you to have a minimum of 20 percent equity in your home. For a rate-and-term refinance, the equity requirement will vary by lender, but you’ll most likely need to continue paying PMI, even after a refinance, if your new loan is worth more than 80 percent of your home’s total value.
The rates on refinances compared to purchase loans might vary somewhat, but overall, they’re comparable. You might notice slightly higher refinance rates when they’re in demand. Experts don’t recommend trying to time the market — in other words, waiting for rates to drop — as there are so many variables that can affect rates, making it difficult to accurately predict whether they’ll rise or fall.

If you find a rate that will save you money, then it’s a good idea to lock it in so you don’t risk missing out if rates jump.
Rate-and-term refinance

With a rate-and-term refinance, borrowers can reduce their interest rate, lower their monthly payments (by extending their loan or through that new rate, or both) or shorten their term (which usually raises monthly payments) in order to pay off the loan faster. A shorter loan term can also save you lots of money in interest.

Cash-out refinance

A cash-out refinance allows you to tap your equity by refinancing your mortgage. Because you're withdrawing cash from your home’s value, the new mortgage amount will be higher than your current loan. Lenders typically limit cash-out refinances to no more than 80 percent of your home’s value so that you still have some equity left in your home.

Sometimes lenders will also charge higher interest rates because the loan amount is increasing. Between a larger mortgage and higher interest rate, make sure you run the numbers before you try to cash out.

Cash-out refinances can meet many financial needs, such as financing home improvements, consolidating high-interest debt or paying for a child’s college education.

Streamline refinance

A streamline refinance is a product for government-backed loans (either an FHA streamline, VA streamline or USDA streamline). The advantage of streamline refinancing is that there are minimal credit requirements and the loan processing is typically fast. A streamline refinance can also be less expensive than conventional refinancing. Some lenders offer streamline refinances with no upfront costs wherein the lender will pay some or all of the closing costs in exchange for a higher interest rate.

Learn more about the types of refinancing.
Closing costs for refinancing your mortgage can run thousands of dollars, usually between 2 percent and 5 percent of the loan amount. These costs also vary by where you live and the lender you choose.
Shopping around for quotes is key for every mortgage applicant. When you shop, consider not just the interest rate, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Some lenders offer lower closing costs and fees than others, or your current bank or credit union might extend you a special offer. Don’t be afraid to walk away from your current lender if you find a better deal elsewhere. Consider working with a mortgage broker, who can help you compare offers from several lenders.
You should refinance if doing so will help you to save money, build equity or pay off your mortgage faster. For example, if interest rates have dropped since you closed your mortgage, you could do a rate-and-term refinance to obtain a lower rate. In addition to a lower rate, you could save by eliminating PMI, or tap your home’s equity via a cash-out refinance. When rates are low, however, it’s important to consider your future plans. If you expect to sell your home in the foreseeable future, for instance, it might not make sense to start over with a new loan.

Written by: Jeff Ostrowski, Senior Mortgage Reporter for Bankrate

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.