Refinancing your mortgage may be worth it now. Current refinancing rates, August 8, 2024

Mortgage rates have fallen to their lowest level since May 2023, creating a increase in demand for refinancing. This week’s drop in mortgage rates is especially attractive to homeowners who bought a home last year when interest rates were at their highest point in more than two decades.

Now that mortgage rates are starting to drop, you need to be ready to take advantage. Experts recommend shopping around and comparing multiple offers to get the lowest rate. Enter your information here to receive a customized quote from one of CNET’s partner lenders.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool includes partner rates from lenders that you can use when comparing multiple mortgage rates.

Refinancing rate news

Following cooling inflation reports and weakening employment numbers, mortgage refinance rates have slowly come down. Still, the majority of homeowners currently have mortgage rates well below 6%, meaning the financial incentive to refinance simply isn’t there yet.

But there’s always an exception to the rule: If you bought a home when mortgage rates were above 8% at the end of last year, the recent drop in rates may be attractive enough to consider refinancing.

While experts don’t expect another refinancing boom like the ones we saw in 2020 and 2021, when mortgage rates were historically low, it’s a positive sign that interest rates are falling or moving sideways rather than rising.

What will refinancing rates be in 2024?

According to experts, slowing inflation and expected Federal Reserve rate cuts should cause mortgage rates to fall to around 6.5% by the end of 2024. But a lot can happen in the meantime.

The Fed has not adjusted its short-term interest rate, the federal funds rate, since last summer and a rate cut now appears inevitable, possibly as early as September, according to Melissa Cohnregional vice president of William Raveis Mortgage and a member of CNET Money’s expert review committee.

As the Fed slowly lowers interest rates over the next few years, mortgage rates should gradually moderate. But if the Fed decides to delay rate cuts or if economic data shows inflation is starting to pick up, mortgage rates are likely to rise.

If you’re considering refinancing, remember that you can’t time the economy: Interest rates fluctuate by the hour, day and week, and are affected by a variety of factors. Your best move is to keep an eye on daily rate changes and have a plan in place to take advantage of a large enough percentage drop, he said. Matt Graham from Mortgage News Daily.

What does refinancing entail?

When you refinance your mortgage, you take out another mortgage that pays off your original mortgage. With traditional refinancing, your new mortgage has a different term and/or interest rate. With cash-out refinancing, you tap into your home equity with a new loan that is larger than your existing mortgage balance, allowing you to pocket the difference in cash.

Refinancing can be a great financial move if you get a low interest rate or can pay off your mortgage in less time, but consider whether it’s right for you. Lowering your interest rate by 1% or more is an incentive to refinance, which can significantly reduce your monthly payment.

Choosing the right refinancing type and term

The rates advertised online often require specific conditions to qualify. Your personal interest rate is affected by market conditions and your specific credit history, financial profile, and application. A high credit score, low credit utilization ratio, and a history of consistent and timely payments will generally help you get the best interest rates.

30-year fixed rate refinancing

For a 30-year fixed refinance, the average rate is currently 6.56%, down 32 basis points from a week ago. (A basis point is equal to 0.01%). A 30-year fixed refinance typically has lower monthly payments than a 15- or 10-year refinance, but it takes longer to pay off the loan and will typically cost you more in interest in the long run.

15-year fixed rate refinancing

The average 15-year fixed refinance rate is now 6.00%, down 30 basis points from what we saw last week. While a 15-year fixed refinance will likely increase your monthly payment compared to a 30-year loan, you’ll save more money in the long run because you’ll pay off your loan faster. Additionally, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.

10-year fixed rate refinancing

The average 10-year fixed refinance rate is now 5.98%, down 20 basis points from what we saw last week. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all the refinance terms. A 10-year refinance can help you pay off your home much faster and save on interest, but make sure you can afford the higher monthly payment.

To get the best refinance rates, make your application as strong as possible by getting your finances in order, being responsible with credit, and monitoring your credit regularly. And don’t forget to talk to multiple lenders and shop around.

Reasons Why You Might Want to Refinance Your Home

Homeowners usually refinance to save money, but there are other reasons to do it as well. Here are the most common reasons why homeowners refinance:

• To get a lower interest rate: If you can get an interest rate that is at least 1% lower than the interest rate on your current mortgage, it may make sense to refinance.
• To change mortgage type: If you have a variable interest rate mortgage and want more security, you can transfer your mortgage to a fixed interest rate mortgage.
• To cancel mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance it to a conventional loan once you have 20% equity.
• To change the term of a loan: Refinancing to a longer term can lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
• To access your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
• To take someone off the mortgage: In the event of a divorce, you can apply for a new mortgage in your own name and use the money to pay off your existing mortgage.