Rates Fall Slightly for 15-Year Loan

Average mortgage refinance rates are largely stable today, with the 30-year unchanged, the 20-year ticking slightly up, and the 15-year slightly down. Homeowners who currently have a more expensive home loan may wish to consider refinancing, provided they plan to stay in their home loan enough to cover closing costs with their interest savings.

Here are today’s average mortgage rates for Thursday, Aug. 19 so you can see if refinancing might make sense for you:

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

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30-year mortgage refinance rates

The average 30-year mortgage refinance loan rate today is 3.112%, unchanged from yesterday’s average. For each $100,000 refinanced at today’s average rate, your total monthly principal and interest payment would be $428. During your entire loan repayment period, you’d pay total interest costs of $53,961 per $100,000 refinanced.

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20-year mortgage refinance rates

The average 20-year mortgage refinance loan rate today is 2.852%, up 0.003% from yesterday’s average of 2.849%. A mortgage refinance loan at today’s average interest rate would cost you $547 per $100,000 borrowed. Total interest costs would be $31,332 per $100,000 in mortgage debt over the life of the refinance loan.

Although your monthly payments are higher on a 20-year refinance loan than a 30-year refinance, you save a lot of money over time. When you repay your loan faster, you don’t pay as much interest because you aren’t paying it for as long — but each payment has to be much bigger to repay the principal in full.

15-year mortgage refinance rates

The average 15-year mortgage refinance loan rate today is 2.379%, down 0.001% from yesterday’s average of 2.380%. At today’s average rate, you’d pay $661 per month in principal and interest per $100,000 refinanced. For each $100,000 you refinance at today’s average rate, total interest costs would add up to $18,999.

If you can afford the higher monthly payments that come with such a short payoff timeline, you may decide that it makes financial sense for you to choose the 15-year refinance loan. Just be sure you’re considering the opportunity cost of committing so much money to mortgage payments each month.

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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 higher total interest costs 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 time. 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, which are the upfront fees you’ll be charged 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 do the math and consider whether you’ll stay in your home long enough for refinancing to pay off.

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In general, it is a good idea to refinance if you don’t plan to move in the next few years and you can reduce your mortgage interest rate by 1% or more. With mortgage refinance rates near record lows, many borrowers will find it’s a good time to refinance. Compare rates from the best mortgage refinance lenders to get some personalized offers and decide whether securing a new home loan now is right for you.

View more information: https://www.fool.com/the-ascent/mortgages/articles/current-mortgage-refinance-rates-august-19-2021-rates-fall-slightly-for-15-year-loan/

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