Several benchmark refinance interest rates floated higher today, September 22nd, according to data compiled by Bankrate.
- 30-year fixed refinance rate: 6.42%, +0.23 vs. a week ago
- 15-year fixed refinance rate: 5.66%, +0.12 vs. a week ago
- 10-year fixed refinance rate: 5.77%, +0.16 vs. a week ago
As price inflation persists, the Federal Reserve again moved aggressively at its July 27 meeting. The Federal Reserve raised rates three-quarters of a percentage point for the second consecutive meeting, a strong policy move that may – or may not – translate to rising mortgage rates. The central bank is ramping up efforts to fight inflation, which has remained high after a bout of pandemic stimulus and supply chain problems. In June, annual price increases clocked in at 9.1 percent. However, the strong move also could tip the U.S. economy into recession, which would push mortgage rates down.
The rise hasn’t been straight upward. Mortgage rates are being whipsawed by concerns that the U.S. economy will contract. The Fed doesn’t directly control fixed mortgage rates — the most pertinent number is the 10-year Treasury yield, and it has bounced around in recent weeks. Even so, high inflation all but forces the Fed to act aggressively, and it sets the tone for rates overall.
Here’s a pro tip: Getting multiple offers can save you thousands of dollars over the life of your mortgage.
“No matter whether the housing market is red-hot, in a cooling-off stage or something in-between, one can and should seek to save money on financing by seeking multiple offers on a mortgage,” says Mark Hamrick, Bankrate senior economic analyst. “The result is savings on the monthly payment, as well as during the entire experience of ownership, and the peace of mind that one got the best rate. That can literally equate to saving thousands of dollars in the long term.”
30-year fixed refinance
The average 30-year fixed-refinance rate is 6.42 percent, up 23 basis points since the same time last week. A month ago, the average rate on a 30-year fixed refinance was lower, at 5.85 percent.
At the current average rate, you’ll pay $622.89 per month in principal and interest for every $100,000 you borrow. That’s an extra $15.60 compared with last week.
You can use Bankrate’s mortgage calculator to figure out your monthly payments and see what the effects of making extra payments would be. It will also help you calculate how much interest you’ll pay over the life of the loan.
15-year fixed refinance
The 15-year fixed refi average rate is now 5.66 percent, up 12 basis points from a week ago.
Monthly payments on a 15-year fixed refinance at that rate will cost around $577 per $100,000 borrowed. That may put more pressure on your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll come out thousands of dollars ahead over the life of the loan in total interest paid and build equity much more quickly.
10-year fixed refinance
The average rate for a 10-year fixed-refinance loan is 5.77 percent, up 16 basis points from a week ago.
Monthly payments on a 10-year fixed-rate refi at 5.77 percent would cost $584.21 per month for every $100,000 you borrow. If you can manage that hefty monthly payment, you’ll enjoy even more interest cost savings than you would with a 15-year term.
Where are refinance rates headed?
Since the beginning of the coronavirus pandemic in 2020, rates have been hovering around historic lows. But now rates are edging higher as the Federal Reserve aims to contain inflation.
Most experts expect rates to increase through 2022.
“Until inflation peaks, mortgage rates won’t either,” says Greg McBride, CFA, Bankrate chief financial analyst.
To see where Bankrate’s panel of experts expect rates to go from here, check out our Rate Trend Index.
Want to see where rates are right now? See local mortgage rates.
|30-year fixed refi||6.42%||0.23||6.19%|
|15-year fixed refi||5.66%||0.12||5.54%|
|10-year fixed refi||5.77%||0.16||5.61%|
What does it mean to refinance your mortgage?
Refinancing your mortgage means taking out a new home loan. In the process, you’ll fully pay off your existing loan, and then start payments on a new one. The two most common kinds of mortgage refinances are rate-and-term changes — which result in a new interest rate and a reset payment clock — and cash-out refinances. The latter allow homeowners to take advantage of their equity by taking out a new mortgage with a larger principal based on the home’s current value.
30-year refi? 15-year refi? Cash-out? What is right for me?
No matter what kind of refinance you decide to undertake, once you close on your new loan, the payment clock goes back to zero. For example, if you take out a new 30-year mortgage, you’ll have another 30 years of payments in front of you.
That said, a 30-year refi is the right choice for a lot of people. Extending the term of your loan means lower monthly payments, which can free up some extra funds if money is tight.
A 15-year refinance has some advantages, too, namely that you pay a lot less interest over the life of the loan. Because 15-year loans tend to have lower interest rates than their 30-year counterparts and a shorter repayment window, the overall savings can be significant. Keep in mind, though, that a short repayment window is a double-edged sword. It does help you save in the long run, but with less time to pay, 15-year mortgages have higher monthly payments.
Here are sample payments on a $300,000 mortgage at 5.5 percent interest:
|Term||Monthly payment||Total cost|
A new mortgage can also help you tap your home equity if you go with a cash-out option. If you have enough equity in your home, you can apply for a new mortgage with a larger principal balance and take the difference from what you owe on your old loan in cash. Doing so can allow you to finance other spending at a low rate compared with other forms of borrowing. Some of the most common uses for cash-out funds are home improvements, debt consolidation or education financing.
How much does it cost to refinance?
Refinance costs can change based on where you’re located, the lender you’re working with and a range of other factors. The general rule of thumb, however, is that costs are around 2 to 5 percent of the loan’s principal amount. On a $300,000 mortgage, that equals $6,000 to $15,000 in closing costs.
Can I save money with a refinance? Is now a good time to refi?
Perhaps, depending on your situation. Because rates rose sharply in late 2021 and early 2022, the easy savings no longer are available. However, a cash-out refinance remains a smart way to pay for home renovations.
Keep in mind, however, you’ll want to calculate your break-even timeline. If you’re planning to move soon, you may not save enough to recoup your closing costs before you do.
How to shop for a mortgage
Shopping around is crucial to get the best deal on your mortgage. Make sure to get quotes from at least three lenders, and pay attention not just to the interest rate but also to the fees they charge and other terms. Sometimes it’s a better deal to choose a slightly higher interest loan if the other aspects are favorable.
Tips for getting the best mortgage rate
- Shop around
- Do your homework to understand the mortgage market in your area
- Consider working with a mortgage broker
- Don’t try to time the market — rates change nearly constantly, and you could lose out on a good deal if you wait
Minimum credit scores for different kinds of mortgages
Different mortgages have different minimum requirements for their borrowers. Although lenders are able to adjust these requirements as they please, here are the most common credit score minimums for some common types of mortgages:
- Conforming: 620
- Jumbo: 700
- FHA: 580 (or 500 if you have at least a 10 percent down payment)
- VA: Varies by lender, but typically between 580 and 640
- USDA: Varies by lender, but typically between 580 and 640
If your credit score is less than 500, work on improving it before applying for a mortgage, because most lenders won’t issue a loan to someone with a score of 499 or lower. On the other hand, if your credit score is higher than these minimums, you may be able to secure a better interest rate.
Methodology: The rates you see above are Bankrate.com Site Averages. These calculations are run after the close of the previous business day and include rates and/or yields we have collected that day for a specific banking product. Bankrate.com site averages tend to be volatile — they help consumers see the movement of rates day to day. The institutions included in the “Bankrate.com Site Average” tables will be different from one day to the next, depending on which institutions’ rates we gather on a particular day for presentation on the site.
To learn more about the different rate averages Bankrate publishes, see “Understanding Bankrate’s Rate Averages.”