Current mortgage refinance rates for September 2021

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Is now a good time to refinance?

Mortgage refinance rates have been hovering near historic lows for quite some time now. If your current mortgage rate is higher than 3.5% or 4%, it may be worth your time to consider refinancing your mortgage soon

Additionally, you might consider a refinance if your monthly payment is unaffordable or your creditworthiness has improved since you first bought your home.

How to find the best mortgage refinance rate

A surefire way to find your best mortgage refinance rate is to shop around. This means identifying three to five mortgage lenders and gathering quotes to compare refinance rates. Comparison-shopping with multiple lenders may save you thousands in interest costs over your repayment term. 

Don’t stop at comparing rates, though. Review the estimated costs and fees with each lender, which can be found on the loan estimate you receive after applying for a refi.

What is a mortgage refinance?

A mortgage refinance is a home loan that replaces your existing mortgage. You borrow a new loan that pays off your old one and start over with a new amortization schedule

Generally speaking, a refinance leads to a loan with better terms, such as a lower mortgage rate or monthly mortgage payment.

Best reasons to refinance a mortgage

You can achieve a few common goals through a mortgage refinance. These reasons to refi might include:

      • Getting rid of mortgage insurance because your home’s value increased and/or you’ve paid down your loan balance significantly. 
      • Lowering your monthly payment by extending your loan repayment term and receiving a smaller payment amount. 
      • Paying off your loan faster by shortening your repayment term from a 30-year to a 15-year mortgage, for example. 
      • Reducing your mortgage rate to save on interest costs and also potentially get a lower payment. 
      • Switching your rate type from an adjustable rate to a fixed rate to secure a more stable loan product.
      • Tapping your home equity to make home improvements, consolidate debt or buy a vacation home.

Common refinance requirements

Conventional loanFHA loanVA loanUSDA loan
Minimum credit score620580620No minimum
Maximum DTI ratio45%43%41%No maximum
Maximum LTV ratio97%97.75%100%No maximum

How to refinance a home loan

Follow these five steps to navigate the mortgage refinancing process: 
  1. Figure out your “why” for refinancing. Do you want a lower mortgage rate? Can you afford a higher monthly payment and shorter loan term and higher monthly payment? Are you ready to borrow from your home equity?
  2. Gauge your financial health. Pull your credit reports and scores. Review your history for errors and file disputes where necessary. You should also have more than enough cash reserves to cover your refinance closing costs, which can range from 2% to 6% of your loan amount.
  3. Shop around and apply. Pick your three to five refi lenders and fill out applications with each. Complete those apps within a 14-day time frame to minimize the temporary hit to your credit score from hard inquiries.
  4. Lock in your mortgage rate. Once you’ve committed to a lender, get a mortgage rate lock to secure the interest rate you were quoted.
  5. Close on your refinance. Work with your lender to finalize your refinance, submit any outstanding paperwork and schedule your closing day.

Types of refinance loans

The most common types of mortgage refinance options are offered by conventional lenders, as well as lenders approved by the Federal Housing Administration (FHA), and U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA). 

      • Rate-and-term refinance loans. This is considered a traditional refinance and often serves the purpose of changing your mortgage rate and/or repayment term. 
      • Cash-out refinance loans. With a cash-out refinance, you get a new mortgage that has a higher balance than what you currently owe on your existing loan. You pocket the difference between the two loans in cash. 
      • Streamline refinance loans. The streamline refinance option is exclusive to homeowners with government-backed loans from the FHA, VA or USDA. In most cases, no home appraisal or income documentation is required.
      • High-LTV refinance loans. Homeowners with conventional loans who have little to no equity may qualify for a high-LTV refinance. The minimum required LTV is 97.01%.

Additional mortgage refinance FAQS

You typically need at least 3% equity to refinance your mortgage. There are programs available to homeowners who either don’t have any equity or have negative equity, meaning their outstanding mortgage balance is higher than their home’s value.

The most notable risks that come with mortgage refinancing include: 

      • Losing your home to foreclosure if you go into mortgage default 
      • Failing to reach the break-even point on your closing costs 
      • Extending your repayment term and more total interest
      • Leveraging your home equity to splurge rather than improving your finances

It can take 30 to 45 days to refinance a home. Your lender might take more or less time to close a refinance, depending on how much business they have and whether they use a digital mortgage application process.

Yes, there are refinance closing costs. These costs range from 2% to 6% of your new loan amount, depending on your loan’s size. 

You may qualify for a no-closing-cost refinance, but don’t be fooled by the name. These aren’t “free” refinances — there aren’t upfront costs at closing; you’ll instead pay in the form of a higher interest rate or larger loan amount.

While it’s more difficult to refinance a mortgage with bad credit, it’s not impossible. For example, you may qualify to refinance an FHA loan with as low as a 500 credit score, provided that you have at least 10% home equity. There’s no minimum credit score required for a VA refinance.

Mortgage refinance rates tend to mirror mortgage purchase rates. However, refinance rates differ from lender to lender, which is why it’s important to shop around and find a rate that’s competitive enough to replace your current mortgage.

If you’d like to buy down your mortgage rate to save even more on interest and shave a few dollars off your monthly payment amount, it may make sense to pay for mortgage points

Be mindful that each point costs up to 1% of your loan amount. On a $250,000 mortgage, one point would cost you $2,500 at the closing table.