What is a refinance mortgage rate?
Refinance mortgage rates are the interest rates lenders charge homeowners when they replace their current home loan with a new one, a process known as mortgage refinancing. These rates determine the cost of borrowing when you refinance and directly impact your monthly payment amount and the total interest you'll pay over the life of your loan.
Many factors affect refinance mortgage rates, including economic changes and government policies, as well as your unique financial profile. The Federal Reserve's monetary policy decisions influence the broader interest rate environment, causing refinance mortgage rates to rise or fall in response to economic conditions and inflation concerns.
Your credit score also plays as important role in determining what your refinance rate is going to be. This is because your financial profile is something lenders use to decide how risky the loan is. So, the more stable and secure the financial profile is, the less risky it seems to lend to that person and they are more comfortable lending at a lower rate.
How do refinance mortgage rates work?
Refinance mortgage rates work similarly to original mortgage rates but apply specifically to the refinancing transaction. When you apply to refinance, lenders evaluate your financial profile and current market conditions to determine the rate they'll offer you. You'll typically see refinance mortgage rates quoted as annual percentage rates, which include both the interest rate and certain fees expressed as a yearly cost.
Some lenders offer no-closing-cost refinances where higher refinance mortgage rates offset the upfront fees, making this option attractive for those planning to move or refinance again within a few years.
Refinancing mortgage calculator
Use our refinancing mortgage calculator to estimate your new monthly payments and see how much you may be able to save.
How does refinancing a mortgage work?
Refinancing a mortgage means replacing your current home loan with a new one. Your lender will pay off your old mortgage with the new loan, then you will make payments on that new loan instead of your old one, ideally a loan with terms that are more beneficial to you financially.
Homeowners usually refinance when they can get a lower interest rate to lower their monthly payments, to shorten the length of their loan, or to access some of their home equity.
The process of refinancing is very similar to the one you did when you got your original mortgage. You’ll need to submit an application, provide financial documentation, and go through the underwriting process. The value of your home will also be appraised and you’ll need to pay closing costs as well that run around 2-5% of the total loan amount.
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