How to Refinance Your Mortgage:

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Where are mortgage rates heading?

The Fed is driving mortgage rates lower and anchoring treasury rates via its policy of asset purchases, often referred to as quantitative easing. This has supported the housing market and mortgage rates have a lot more room to fall as they closely track the 10 yr treasury. The current spread of 240 bps is well above the pre-covid average of 170. Since the Fed announced unlimited MBS in March, the spread has narrowed by 30 bps, that’s is what resulted in the record lows we are seeing now. Another 30 bps decline is quite conceivable to 2.70% in the fall. If we fully close the increased spread, rates could hit 2.30% in 2021, if treasury rates remain close to where they are. – Tendayi Kapfidze, LendingTree Chief Economist

What is refinancing?

Refinancing is a do-over of your home loan. You may want to lower your monthly payment, pay your loan off faster, or tap some equity for home improvement or debt consolidation. Refinancing replaces your old loan with a new loan to help improve your finances. And LendingTree studies show comparing rates with multiple lenders saves thousands in interest over the life of a home loan.
  • How can I get a lower refinance rate?

    Three words: shop, shop, shop. Refinance rates change daily, and LendingTree’s comparison tool does the heavy lifting for you, checking interest rates at multiple lenders in minutes. You’ll get custom rates quotes based on details you input about your current mortgage and the reason for your new mortgage.

  • Are refinance rates higher than mortgage rates?

    The answer: it depends on your credit history and why you’re refinancing. Credit scores play a big role in the mortgage rate you get. The higher your score, the lower your interest rate will be. If you’re taking cash out you may pay a slightly higher rate. Refinancing to cut your monthly payment or pay your loan off more quickly typically gets you the lowest rate.

  • Is now a good time to refinance?

    If you can save money and recoup your costs before you sell your home, it’s a good time to refinance. This is also known as a breakeven, and it’s easy to calculate. Just divide the closing costs on your best rate quote by the monthly savings. The result is the number of months it will take to recover refinance costs. The lower the breakeven, the more cost-effective the refinance.

  • Does refinancing hurt credit?

    No, and neither does comparison rate shopping. If you apply to multiple lenders within a 45-day time frame, your scores won’t be impacted. In fact, you may improve your credit score if you refinance to tap equity and pay off maxed-out credit cards.

  • Is it cheaper to refinance with current lender?

    The only way you’ll know is to compare what they offer against at least three to five other lenders. Another valuable refinance tip: once you choose your best offer, get a mortgage rate lock. If you don’t, you could end up with a higher rate closing.

  • What credit score is needed to refinance?

    Annual PMI can cost up to 1.5% of your loan balance, and can’t be canceled on most loans insured by the Federal Housing Administration (FHA) regardless of how much equity you have. Refinancing into another mortgage lets you reduce or even eliminate burdensome PMI costs, especially if you have extra cash on hand.

LendingTree Study: Cities Where Mortgage Refinance Borrowers Saved the Most by Shopping Around - Q2 2020

By Tendayi Kapfidze, LendingTree Chief Economist

Mortgage rates have fallen to record lows in the wake of the COVID-19 pandemic, creating an opportunity for homeowners to refinance their mortgages and potentially save money.

To help consumers understand how much they might save, LendingTree created its Mortgage Rate Competition Index. It measures the basis-point spread between high and low annual percentage rates, or APRs, offered to users on the LendingTree platform through the second quarter of 2020.

On average, LendingTree found that in 50 of the nation’s largest cities refinancing could save homeowners an average of nearly $23,000 over the life of their loan. That could translate to about $18,000 in Columbus, Ohio, or nearly $27,000 in Boston

Key Findings

Comparing refinance offers can yield big savings for borrowers in a variety of the nation’s largest cities The three cities where refinance borrowers can save the most are Boston ($27,277), Pittsburgh ($26,249) and Philadelphia ($25,833).

Pittsburgh, Greensboro, N.C. and Oklahoma City are the cities where refinance borrowers can see the largest spread in APRs when they shop around. The average index in these three areas is 0.57. This spread yields average lifetime interest savings of $24,255.

Even in cities where savings aren’t as robust as they are in Boston or Pittsburgh, significant savings are still possible. For example, in Columbus, Ohio, where potential savings are the lowest, refinance borrowers can still save $18,442 over the life of their loan by shopping around.

  • Cutting back the total interest paid over a loan’s lifetime can translate into meaningful savings on a monthly and annual basis. For example, refinance borrowers can save about $64 a month, or $766 a year.

What the index means for you

Let’s say a borrower is offered two loans on the LendingTree platform – one with an APR of 4% and another with an APR of 3.5% – the spread would be 0.5%, or 50 basis points. The wider the index, the more a potential buyer can save by shopping around with multiple lenders.

For this report, we used the index to analyze the difference in rates and potential savings for mortgage refinance borrowers in 50 of the largest cities in the United States. By using LendingTree to shop around before refinancing, a borrower could potentially save an average of nearly $23,000 over the life of their loan.

What is the Mortgage Rate Competition Index?

The LendingTree Mortgage Rate Competition Index is a proprietary measure of the dispersion in mortgage pricing. It measures the APR spread of the best offers available on LendingTree relative to the least competitive (i.e., the highest) rates on 30-year, fixed-rate mortgages. Our research shows that mortgage rate competition varies with the financial and operational measures of activity in the mortgage markets. More details on the index are available in a LendingTree white paper.

How is the index formulated?

mortgage shopper enters their information on They input loan variables, including the proposed amount and down payment, and property variables, including property type and location. Using our proprietary algorithm, LendingTree matches borrowers with lenders based on the criteria they provide. Interested lenders return a rate and fee offer. For our index, we combine the rate and fees into an APR and calculate the spread as follows:

The spread is the difference between the highest and lowest offers. In this example, 4.62-4.21 = 0.41. We repeat this calculation across 30-year, fixed-rate loans and then find the median of the individual spread, which is our index value. This is done separately for the population of purchase and refinance loan requests. For the purposes of this study, we used data on the combined statistical area (CSA) or metropolitan statistical area (MSA) levels to approximate data on a city level.

LendingTree research analyst Jacob Channel contributed to this report.

Additional mortgage refinance FAQS

Refinancing comes with many benefits, but there are risks, too. Here are the most notable risks that come with mortgage refinancing:

  • – Losing your home to foreclosure if you default on the new loan
  • – Not breaking even on your closing costs
  • – Restarting the clock on your loan term and paying more total interest
  • – Misusing cash-out refinance funds in ways that add to your debt load without improving your finances

The most common types of refinances are offered by conventional lenders, as well as those approved by the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA). Here are details about each option:

    • Conventional refinance. Ideal for borrowers who have good credit, stable incomes and low DTI ratios.
    • FHA refinance. Homeowners with scores below 620 may benefit from the easier qualifying guidelines offered by FHA-approved lenders. If you already have an FHA mortgage, you may be eligible for an FHA streamline refinance, which doesn’t require income verification or a home appraisal.
  • VA refinance. VA loans include less stringent mortgage refinance requirements for eligible active-duty and veteran military borrowers, and they don’t require PMI. Homeowners with a current VA loan may be eligible for the interest rate reduction refinance loan (IRRRL) program to lower their payment with minimal documentation and no appraisal.

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.