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What is a good mortgage refinance rate?

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Even with higher interest rates, refinancing a mortgage can still make sense. Getty Images

In recent years, Americans saw mortgage interest rates plummet to historically low levels, prompting many borrowers to refinance their existing home loans. These refinance loans serve to replace homeowners' current mortgages with new loans and new terms, often allowing them to lock in lower interest rates and even cash out on their home's established equity.

With interest rates beginning to climb again, however, others might be wondering if this is still a good time to refinance home loans — or if it makes more sense to wait. So, let's take a look at where mortgage refinance rates currently sit. We'll also break down how they've changed in recent years - and why a refinance may still be worth pursuing. 

If you think you could benefit from refinancing your mortgage then answer a few brief questions to see what you're eligible for.

What mortgage refinance rates are currently

According to data from Freddie Mac, the average mortgage interest rate in early February 2023 was 6.09% on a 30-year fixed-rate loan. 

While mortgage refinance rates can vary slightly from mortgage origination loan rates, these numbers show a trend that's standard across the board: a mortgage refi will cost you more in interest today than it would have a year or two ago.

A standard home mortgage loan is an installment-based loan that runs either 15 or 30 years in length. Homebuyers can choose between a fixed or variable interest rate, which determines how much that home purchase loan will cost them over the course of that repayment. 

If market interest rates change between the time that loan is originated (opened) and when it's paid off, though, it can often make sense to refinance the entire loan. This refi takes the place of the original home mortgage loan, ideally with a lower interest rate and better repayment terms.

Answer a few simple questions and determine if a mortgage refinance works for you or use the calculator below to crunch the numbers.

Mortgage refinance rates during the height of the pandemic

During the pandemic, interest rates on home mortgages dropped to the lowest numbers we've ever seen, further spurring the influx of homebuying (and decreased market inventory) that is only just now beginning to slow.  In January 2021 these rates bottomed out at just 2.65%.

With interest rates this low, it only made sense for a slew of homeowners to jump at the opportunity for a mortgage refi. And of course, that's what occurred. There were more than four times as many refinance loans originated in 2021 than in 2018, according to data from the Consumer Finance Protection Bureau (CFPB).

But while rates are no longer this low, many homeowners can still find value in refinancing their home mortgage loans today

Why mortgage refinancing is still worth pursuing

Rates have risen from these historic lows, and no one knows when (or if) they will ever return. 

However, it's important to note that refinancing a mortgage loan can still be a wise financial decision today. After all, while mortgage rates are higher now than they were in 2020-2021, they are still low by historical standards.

In the year 2000, the average mortgage interest rate reached a peak of 8.64%. In the mid-1980s homebuyers saw rates as high as 14.68%. In 1981 rates were sitting at all-time highs of 18.39%. 

Alongside these numbers, today's average interest rates are still "low" by all accounts. 

At the end of the day, the decision to refinance a mortgage loan depends on your specific loan terms and goals. If today's rates are lower than what you're paying on an existing mortgage loan, refinancing could potentially save you a lot of money in interest, drop your monthly payment, get your home paid off faster, or all three. 

The goal of a refinance isn't limited to reducing your interest rate, either. Homeowners can also utilize a cash-out refinance to pull from their home's equity, especially if they're able to lock in a competitive rate. This money can be used to pay off debt, fund a home renovation, or cover large expenses like college tuition or a wedding.

No one knows exactly what interest rates will do moving forward, or how high they'll climb. If you've been thinking about refinancing your mortgage, the best time to do so might still be now. 

Speak to a mortgage refinance expert today or use the table below to review some top providers on the market.

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