Low refinance rates can save you hundreds to thousands of dollars by knocking points off your existing loan. Depending on the type of loan, refinancing could be in your wallet’s best interest.
Refinancing is when you obtain a new loan to replace your existing loan. For instance, when you refinance mortgage terms, your new loan will pay the old one. In some cases, you may be able to get a cash-out to refinance a loan and get cash in your pocket.
A home purchase is usually you most expensive purchase you make in your lifetime. Because of the high price tag, getting a low-interest rate is even more important for your mortgage.
Mortgage interest rates have greatly fluctuated over the last few decades. Prospective homeowners can find rates averaging 6.42 percent as of March 23, 2023.
However, current homeowners may be paying a much higher rate on mortgages obtained 20 or 30 years ago. Check out the average rate for a home loan at the beginning of each decade:
- 2020 – 3.7 percent
- 2010 – 4.69 percent
- 2000 – 8.05 percent
- 1990 – 10.13 percent
- 1980 – 13.74 percent
You should look into refinance mortgage rates if your current rate is one to two points higher than the current average. Otherwise, the monthly savings may not be worth closing costs.
How much you will save with the best refinance rates available will depend on:
- Your loan balance
- Current interest rate
- New refinance mortgage rate
- Closing costs (depends on percentage)
- How long you plan to keep the loan
The greater the difference between existing and refinance rates, the more you will save each month and over the course of the loan. You will need to maintain the loan for at least a few years to break even on the closing costs.
Search the internet for the best refinance rates available, and compare lenders and terms carefully. Closing costs can range from one to eight percent of the loan balance. Some lenders waive the closing fees but have higher refinance mortgage rates.
You may be able to get a cash-out to refinance loan to get funds for home improvements or other expenses. If you have home equity built up, you can get a loan for more than you owe but less than the value of your home.
You can refinance your second biggest expense too.