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Homeowners interested in getting a lower interest rate and paying off their mortgage faster might consider a 15-year mortgage refinance. In the second quarter of 2021, 30% of borrowers shortened the term of their loan when refinancing, according to Freddie Mac.
If you’re considering refinancing, here’s what you need to know about 15-year refinance rates.
Credible lets you compare mortgage refinance rates from various lenders, all in one place.
Current Trends in 15-Year Mortgage Refinance Rates
Here’s how mortgage refinance rates have changed over the past 12 months.
Here’s what the average annual mortgage interest rate has looked like over the past 39 years.
Changing economic conditions, central bank policy decisions, investor sentiment and other factors influence the movement of mortgage rates. Credible’s average mortgage rates and mortgage refinance rates are calculated based on information provided by partner lenders who pay compensation to Credible.
The rates assume a borrower has a credit score of 740 and is borrowing a conventional home loan for a single-family home that will be their primary residence. Rates also assume no (or very low) discount points and a 20% deposit.
Credible mortgage rates will only give you an idea of current average rates. The rate you receive may vary depending on a number of factors.
Although a 15-year mortgage refinance is not as popular as a 30-year refinance, it has several advantages:
- Pay less interest. On average, you will pay less total interest over the term of the loan. Because you’re paying off your mortgage sooner, you’ll save years on your interest payments.
- Build equity faster. The 15 year term allows you to build equity much faster than with a 20 or 30 year loan.
- Pay off your loan sooner. Compared to a 30-year loan, a 15-year loan allows you to pay off your loan in half the time and own your home faster.
Disadvantages of a 15-year mortgage refinance
A 15-year mortgage refinance also has some disadvantages to consider:
- Your monthly payment may be higher. If you are refinancing for a shorter loan term, you will face higher monthly mortgage payments.
- You may have less money to spend on other goals. A higher monthly payment may prevent you from building up your emergency fund or putting money aside for your retirement. You may be “house rich”, but you could end up “money poor”.
- You will pay refinancing fees. It’s not uncommon to pay 3% to 6% of the total loan amount in refinance fees, but these fees vary from lender to lender.
When is the right time to refinance?
Refinancing may be the right decision if your interest rate is high. higher than the current interest rate for a 15-year refinance.
Consider whether or not the monthly savings you get from refinancing is more than the closing costs you’ll pay when getting a new home loan. These costs vary, but may include loan origination and application fees, home appraisal fees, credit report fees, title and insurance search fees, mortgage points and fees. of settlement.
But when you refinance, you also have the option of saving on your monthly payment, benefiting from a lower interest rate, shortening the term of your loan, or even canceling your mortgage insurance payments (if you have accumulated enough equity in your home).
With Credible, you can compare mortgage refinance rates from multiple lenders without affecting your credit.
How to get your lowest mortgage refinance rate
www.foxbusiness.com/personal-finance/refinancing-requirements-what-to-know you will get are beyond your control. But there are several steps you can take to ensure you get the best refinance rate available to you. Here are a few :
Save for closing costs
In addition to saving for a down payment, it’s also a good idea to save for closing costs, which can reach an average of $5,000, depending on Freddie Mac.
Refine your credit
Just like when you bought your home, your credit score and history affect your refinance rate. So it’s a good idea to make sure your credit is in the best shape possible.
Check your credit report for errors, such as incorrect information or duplicate accounts. Pay off as many other debts as possible to improve your debt-to-equity ratio and pay down your credit card balances to reduce your use of credit.
Just as you would compare quotes from multiple vendors for an expensive repair to your home, you should review loans and mortgage interest rates from multiple lenders. In fact, getting five quotes could save you $3,000 over the life of your mortgage, according to a Freddie Mac Poll.
What is the average cost of refinancing?
Your exact refinance costs will depend on several factors, including your loan amount and where you live. Typical refinance costs include:
- The cost of registering your new mortgage
- Expert fees
- Lawyer’s fees
- Lender fees, such as origination or underwriting
- Title Service Fee
- Credit application fees
- Mortgage points
- Prepaid interest charges
Keep in mind that there is no such thing as a truly no-cost refinance. Lenders who market “no-fee loans” usually charge a higher interest rate and build the cost into the loan, which means you’ll pay more interest over the life of the loan.
The ideal credit rating for a good 15-year mortgage refinance can vary. FICO rates credit scores over a range:
- Exceptional — 800 or more
- Very well – 740 to 799
- Good – 670 to 739
- Fair – 580 to 669
- Poor – 579 or less
To get a good 15-year refinance rate for a conventional loan, you’ll usually need a minimum credit score of 620, but this varies by lender. For a rate-and-term or cash FHA refinance, you may qualify with a credit score between 500 and 580.
On the other hand, VA loans, FHA Streamline Refinance loans, and USDA loans do not have minimum credit score requirements.
Lenders also look at factors other than your credit score when offering a refinance rate, including your debt-to-equity ratio – the percentage of your gross monthly income that goes towards paying your debt. Other factors include your loan-to-value ratio (the percentage of your home’s value that you plan to finance) and the type of mortgage program.
You can compare mortgage refinance rates from various lenders in minutes with Credible.