Current mortgage refinance rates for May 2022

Compare mortgage rates to reduce your monthly payment, pay off your loan faster and save thousands in interest charges.

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What is a mortgage refinance?

A mortgage refinance is the process of getting a new home loan to replace an existing one. You typically follow the same steps you did for your purchase mortgage, except your new loan pays off your old one.

A mortgage refinance typically leads to a lower rate, a shorter term or some extra cash in your pocket.

Is now a good time to refinance?

With rates expected to rise throughout 2022, it may not be the best time to refinance if you’re looking to lower your current rate. However, there are other financial reasons to refinance including:

Getting rid of mortgage insurance because your home’s value has increased. You may be able to reduce the cost of private mortgage insurance (PMI) on a conventional loan if you don’t have the 20% equity required to avoid it.

Lowering your monthly payment by replacing a 15-year mortgage with a longer-term, 30-year fixed-rate loan.

Paying your loan off faster by refinancing a 30-year term to a 10-, 15- or 20-year term.

Paying off an adjustable-rate mortgage (ARM) before the ARM rate and payment adjusts higher than current 30-year rates.

Tapping your home equity to make home improvements, consolidate debt or buy a vacation home.

Replacing a government-backed loan with a conventional loan, to get rid of lifetime FHA mortgage insurance required on loans backed by the Federal Housing Administration (FHA).

How to refinance a home loan

Follow these six steps to navigate the mortgage refinancing process:

  1. Figure out your refinancing “why.Do you want a lower mortgage rate? Can you afford a higher monthly payment and shorter loan term? Are you ready to borrow from your home equity?
  2. Gauge your financial health. Pull your credit reports and scores. A credit score of at least 740 will typically get you the best rate offers. Budget enough cash reserves to cover your refinance closing costs, which can range from 2% to 6% of your loan amount.
  3. Gather information about your home’s value. Try a home value estimator or contact your real estate agent to help pinpoint your home’s value. The more equity you have, typically the lower your rate will be.
  4. Shop around and apply. Pick three to five refinance 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 multiple hard inquiries.
  5. 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.
  6. 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), 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 loan-to-value (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%.

Common minimum refinance requirements

The table below gives you a quick glance at the credit score, debt-to-income (DTI) ratio and loan-to-value (LTV) ratio requirements for the types of refinance loans above:

Loan programRefinance purposeCredit scoreLTV ratioDTI Ratio
Conventional
  • Rate and term
  • Cash out
  • 620
  • 97%
  • 80%
  • 45%-50% 
FHA
  • Rate and term
  • Cash out
  • Streamline
  • 580
  • 500
  • N/A
  • 97.75%
  • 80%
  • N/A
  • 43% (rate-and-term and cash-out refinances)
  • N/A
VA
  • Rate and term
  • Cash out
  • Streamline
  • No guideline minimum
  • 100%
  • 90%
  • N/A
  • 41% (rate-and-term and cash-out refinances) 
  • N/A
USDA 
  • Streamline
  • N/A
  • N/A
  • N/A

How to find the best mortgage refinance rate

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

Make sure you also compare the estimated costs and fees with each lender, which can be found on the loan estimate you receive after applying for a refinance. A super-low rate with super-high fees may not be the best fit for your financial plans.

How to calculate your break-even point

The best way to determine whether a refinance makes sense is to calculate your break-even point. Just divide your total closing costs by your monthly savings.

For example, if a refinance saves you $150 per month on your payment but costs you $5,000 in fees, the breakeven would be just over 33 months ($5,000/$150 = 33.33). As long as you plan to stay in your home at least 33 months, the refinance saves you money. Try a mortgage refinance calculator to help you crunch the numbers on different refinance scenarios.

Frequently asked questions

Because refinance loans require a credit check, the inquiry may drop your credit score between three and seven points. When you’re mortgage shopping, try to have your credit run within a 14-day period to avoid a bigger drop from multiple inquiries.

Conventional loan guidelines allow you to refinance at any time after you close, as long as you can prove there’s some financial benefit. Some government-backed refinance programs require proof you’ve made payments on your current mortgage for at least seven months. If you’re taking cash out, the waiting period may be up to a year if you want to use your home’s current market value.

You typically need at least 3% equity to refinance your mortgage, unless you’re eligible for a streamline refinance program through the FHA, VA or USDA. There are also programs available to homeowners to refinance an underwater home, meaning their outstanding mortgage balance is higher than their home’s value.

The most notable risks that come with mortgage refinancing include:

  • A low appraised value that reduces the benefit of the refinance
  • Selling your home before reaching the break-even point on your closing costs
  • Losing your home to foreclosure if you go into mortgage default
  • Extending your repayment term and paying higher overall interest costs
  • Leveraging your home equity to splurge rather than improving your finances
  • Reducing your profit when you sell your home by tapping too much equity

It can take 45 to 54 days to refinance a home, depending on the loan program, according to the December 2021 ICE Mortgage Technology Origination Report. 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. Don’t be fooled by advertisements for a no-closing-cost refinance. These aren’t “free” refinances — the lender covers your upfront costs at closing by charging you a higher interest rate or increasing your 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 you have at least 10% home equity. There’s no minimum credit score required for a VA refinance, although many lenders require a 620 minimum.

Mortgage refinance rates tend to mirror purchase mortgage 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.