A rate and term refinance is a loan improvement. You exchange your old mortgage for a new one that (hopefully) leaves you in a better financial position.
You may be able to accomplish one or more goals with a rate and term refinance, such as:
Lowering your monthly payment.
Reducing the amount of interest you pay over the long term.
Building equity in your home and paying it off faster.
Changing the type of loan you have, from an adjustable-rate to a fixed-rate mortgage or an FHA to a conventional loan, for example.
Eliminating mortgage insurance.
When to consider a rate and term refinance
Several situations might prompt you to consider a rate and term refinance. Mortgage rates moving significantly lower might be one. Having an adjustable-rate mortgage approach the end of its initial fixed-rate guarantee could be another.
Other scenarios that might present an excellent opportunity to refinance your
Borrowers with 700 credit scores were quoted an average rate of 3.433% to secure a 30-year fixed-rate purchase mortgage on Wednesday, according to Money’s survey of over 8,000 lenders across the United States. At this credit score, roughly the national average, the average rate for a 30-year refinance was 4.366%. Our rates include discount points and are for borrowers putting 20% down.
|30-year fixed-rate purchase mortgage|
|Rate of September 9, 2020|
Borrowers in Washington, D.C. were quoted the lowest mortgage rates on Wednesday—at 3.258%. Those in Georgia saw the highest average rate at 3.678%. Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 3.088%, while those with credit of 640 or below were given rates of 4.892%—a 1.804 percentage point spread.
You may be able to negotiate a lower rate if you shop around or if you