Today’s refi rates ratchet higher

Several benchmark refinance rates moved higher today compared to a week ago, according to data compiled by Bankrate.

• 30-year fixed refinance rate: 7.45%, +0.07 vs. a week ago
• 15-year fixed refinance rate: 6.74%, +0.10 vs. a week ago
• 10-year fixed refinance rate: 6.84%, +0.07 vs. a week ago

The Federal Reserve resumed its fight against inflation at the policymaker’s July 26 meeting, increasing interest rates a quarter point.

Housing economists hope an end is in sight for rate tightening – and that refinance rates finally will fall a bit later in the year.

“A Fed rate hike was a foregone conclusion, but the mystery surrounds what will happen with inflation,” says Greg McBride, Bankrate’s chief financial analyst. “If we see meaningful improvement in core inflation, that’ll help tame long-term rates too.”

30-year fixed refinance

The average 30-year fixed-refinance rate is 7.45 percent, up 7 basis points over the last week. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.26 percent.

At the current average rate, you’ll pay $695.79 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $4.77 higher.

You can use Bankrate’s mortgage calculator to estimate 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 average for a 15-year refi is currently running at 6.74 percent, up 10 basis points over the last seven days.

Monthly payments on a 15-year fixed refinance at that rate will cost around $876 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.

10-year fixed refinance

The average rate for a 10-year fixed-refinance loan is 6.84 percent, up 7 basis points since the same time last week.

Monthly payments on a 10-year fixed-rate refi at 6.84 percent would cost $1,152.86 per month for every $100,000 you borrow. As you can see, the hefty savings in interest costs you’ll reap with that short 10-year term comes with the downside of a much larger monthly payment.

Where will refinance rates head in the future?

Most housing economists expect mortgage rates to pull back under 6 percent in the coming months. 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.

What is a mortgage refinance?

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 prevalent 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 home 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 refi? 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 ahead of you.

That said, a 30-year mortgage refinance is the right choice for the majority 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 term, but with less time to pay, 15-year mortgages have higher monthly payments.

Here are sample payments on a $300,000 mortgage at 6 percent interest:

A new mortgage can also help you tap your home equity if you opt for 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 this 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.

What does a mortgage refinance cost?

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 you save money with a refinance? Is now a good time to refi?

Because many homeowners locked in record-low rates in 2020 and 2021 and they’ve since since gone up, refinancing generally isn’t a money-saving move at this time. Consider refinancing in the future if prevailing interest rates fall below the rate you currently have on your mortgage.

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 make up for 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

Minimum credit scores for different kinds of mortgages

Different mortgages have different minimum requirements for their borrowers. Although lenders are able to adjust these numbers as they please, here are the most common credit score minimums for some common types of mortgages:

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. Conversely, 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.”

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