Today’s best mortgage refinance deal? 10-year rates emerge as top savings option | July 15, 2022

• 30-year fixed-rate refinance: 5.625%, up from 5.500%, +0.125
• 20-year fixed-rate refinance: 5.250%, up from 5.125%, +0.125
• 15-year fixed-rate refinance: 4.875%, up from 4.750%, +0.125
• 10-year fixed-rate refinance: 4.750%, up from 4.625%, +0.125

Rates last updated on July 15, 2022. These rates are based on the assumptions shown here.

What this means: Mortgage refinance rates edged up across all terms today. Rates for a 10-year refinance are currently lower than rates for all other repayment terms, and are nearly a full percentage point lower than a 30-year term. Homeowners who want to make home improvements can save more on interest with a cash-out refinance than they would by funding those improvements with credit cards or personal loans.

WHAT IS CASH-OUT REFINANCING AND HOW DOES IT WORK?

How mortgage rates have changed over time

Today’s mortgage interest rates are well below the highest annual average rate recorded by Freddie Mac — 16.63% in 1981. A year before the COVID-19 pandemic upended economies across the world, the average interest rate for a 30-year fixed-rate mortgage for 2019 was 3.94%. The average rate for 2021 was 2.96%, the lowest annual average in 30 years.

The historic drop in interest rates means homeowners who have mortgages from 2019 and older could potentially realize significant interest savings by refinancing with one of today’s lower interest rates.

How to get your lowest mortgage refinance rate

If you’re interested in refinancing your mortgage, improving your credit score and paying down any other debt could secure you a lower rate. It’s also a good idea to compare rates from different lenders if you're hoping to refinance so you can find the best rate for your situation.

Borrowers can save $1,500 on average over the life of their loan by shopping for just one additional rate quote, and an average of $3,000 by comparing five rate quotes, according to research from Freddie Mac.

Be sure to shop around and compare current mortgage rates from multiple mortgage lenders if you decide to refinance your mortgage. You can do this easily with Credible's free online tool and see your prequalified rates in only three minutes.

How does Credible calculate refinance rates?

The rates assume a borrower has a 740 credit score and is borrowing a conventional loan for a single-family home that will be their primary residence. The rates also assume no (or very low) discount points and a down payment of 20%.

Think it might be the right time to refinance? Be sure to shop around and compare rates with multiple mortgage lenders. You can do this easily with Credible and see your prequalified rates in only three minutes.

Are refinance rates higher than purchase rates?

Refinance rates are generally higher than rates for new mortgages to buy a house. Here are some factors that influence the higher rates:

• Risk — A borrower who refinances into a shorter term to get a lower interest rate and pay off their loan sooner may end up with a higher monthly payment. That higher payment could translate into an elevated risk of default. Likewise, in cash-out refinances, the borrower’s debt-to-income ratio rises — and possibly their risk of defaulting.
• Revenue — A lender may be able to make more money off a purchase loan than a refinance. Many homebuyers choose longer terms for purchase mortgages, which come with higher interest rates. Refinancing into a shorter term and/or lower interest rate reduces the amount of interest the lender makes over the life of a loan.
• Costs — Refinancing a mortgage comes with many of the same closing costs you’ll face when you take out a new mortgage, such as an appraisal, attorney fees and more. Closing on a refinance also has costs for the lender. But whereas the lower interest rate and shorter term you get with a refinance benefits you financially, the lender will make less in interest over the life of the refinanced loan.
• Your credit — Hopefully, your credit continues to improve once you become a homeowner. But that’s not always the case for everyone. A homeowner whose credit score has actually fallen since they initially bought the house may look like a bigger risk to lenders — who may charge a higher interest rate to offset the perceived risk.

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As a Credible authority on mortgages and personal finance, Chris Jennings has covered topics that include mortgage loans, mortgage refinancing, and more. He’s been an editor and editorial assistant in the online personal finance space for four years. His work has been featured by MSN, AOL, Yahoo Finance, and more.