Today's Mortgage Refinance Rates -- December 28, 2020: Rates Are Super Competitive

Refinance rates are looking good today. Should you apply?

Just as regular mortgage rates have been competitive in recent weeks, so too are mortgage refinance rates in a good place. Though refinance rates tend to be a little higher than the rates you'll secure for a new purchase mortgage, they're still quite attractive. This is what they look like today:

Data source: The Ascent's national mortgage interest rate tracking.

30-year mortgage refinance rates

The average 30-year refinance rate today is 2.866%. At today's rate, you'll pay principal and interest of $414.51 for every $100,000 you borrow. That doesn't include added expenses like property taxes and homeowners insurance premiums.

15-year mortgage refinance rates

The average 15-year refinance rate today is 2.343%. At today's rate, you'll pay principal and interest of $659.28 for every $100,000 you borrow. Compared to the 30-year loan, your monthly payment will be $244.77 higher per $100,000 in mortgage principal. Your interest savings, however, will amount to $30,355.31 over the life of your repayment period per $100,000 of mortgage debt.

Should you refinance your mortgage right now?

Refinancing your mortgage can be a smart financial decision if you're able to reduce your interest rate and lower your monthly payments by securing a new home loan. However, there are a few key things to think about before you refinance.

First, if you extend your loan repayment term, you could end up paying a higher amount of total interest over time than with your existing mortgage. This can occur even if you qualify for a lower interest rate since you'd be paying interest over a longer period. You can avoid this issue by choosing a refinance loan with a shorter repayment term. Or you may decide you're willing to pay more interest over the life of your loan in exchange for a reduced monthly payment.

Second, you will have to consider closing costs. There are up-front fees to pay when you refinance your mortgage. The Ascent's research revealed that closing costs on a refinance loan for a median value home total anywhere from $5,000 to $12,500. However, your closing fees will depend on the amount of your home loan, your location, and your lender.

You should eventually make up for these closing costs due to your lower monthly payments -- but that can take time. If you save $200 per month by refinancing and pay $6,000 in closing costs, you would take 2.5 years to break even. It's important to run the numbers and consider whether you'll stay in your home long enough for refinancing to pay off.

In general, refinancing can make a lot of sense if you don't plan to move within the next few years and you're able to reduce the interest rate on your mortgage by 1% or more. With mortgage refinance rates sitting near record lows, many borrowers will find that it's a good time to refinance. This especially holds true for borrowers with strong credit and low debt-to-income ratios. If you think you're ready to refinance, reach out to different mortgage refinance lenders to get some personalized offers. Comparing your choices could result in major savings on a new home loan.