Best Mortgage Refinance Rates for December 2024

Searching for the best mortgage refinance rates? Refinancing isn’t as cheap as it used to be so it’s more important than ever to get your finances in shape and shop around for a lender.

We’ve put together a comprehensive guide to show you which mortgage refinance rates are available, how they work, and how you can get the best possible rate. Our guide provides timeless advice for whatever rate environment you’re in.

Current mortgage refinance rates

Graph showing 30, 15, 10, 5 year fixed refinance rates in the last 6 months. Examples: BankRate; NerdWallet.

Mortgage refinance trends

Mortgage refinance rates for the past six months have remained fairly steady compared with the upward trajectory of post-pandemic rate increases.

Mortgage refinance rates for 30-year mortgages ranged between 6% and 8% in the last six months. The low end of the range occurred when the market anticipated lower rates around the beginning of 2024. Rates surged on news that the federal funds rate would remain the same through much of 2024. Current rates hover just below 7%.

The real question everyone is asking is, “Will interest rates go down in 2024?” Economists have revised the mortgage rate outlook for 2024 after the Federal Reserve announced that it would maintain the target range for the federal funds rate rather than cut it. Its objective is to wait to cut rates until inflation has reached levels around 2%.

What to know about mortgage refinance rates

Mortgage refinance rates differ from day to day and lender to lender, but they usually fall within a range. In dealing with these rates, there are factors that you can’t control, such as the current federal funds rate, and some that you can, such as your credit score and debt level.

Factors outside your control that affect your refinance rate:

• Interest rate. The interest rate you’re quoted by a lender depends on how much it is able to secure the loan for, which is often tied to the prime rate.
• The bond market. There is an inverse relationship between mortgage rates and the bond market. When the rates on bonds increase, mortgage rates go down.
• Economic data. The mortgage market is tied to economic data. For example, when inflation eases up, Treasuries’ yields go down, which leads to lower mortgage rates.
• Market conditions. If there is a high demand for mortgages, you could pay more. If there isn’t much demand for mortgages, you could get a better deal because lenders need to compete for your business

Factors within your control:

• Credit score and history. If you’re a responsible borrower with a good credit score, you’re more likely to qualify for the lender's best rates.
• Debt-to-income (DTI) ratio. Too much debt may prevent you from qualifying for the loan, no matter how good your credit is.
• Loan amount. The amount you need to refinance, especially if it’s a cash-out refinance, can affect your interest rate.

Refinance rates are also affected by the following:

• State of residence.
• Type of residence (single-family, condo, townhome, manufactured, etc.).
• Status of residence (primary residence, second home, or investment property).
• Cash-out or traditional mortgage.
• Loan-to-value (LTV) ratio (the percent you borrow relative to the home’s market value).

What is a mortgage refinance?

A mortgage refinance means you replace your existing mortgage with a new one. The new mortgage can change in any number of ways, including:

• Loan amount.
• Interest rate.
• Interest type (ARM vs. fixed).
• Loan term (30 year, 20 year, 15 year, etc.).
• Loan type (FHA, conventional, USDA, VA, jumbo).
• Lender.

Borrowers need to qualify for the new mortgage. Keep the following in mind:

• Home equity. For a refinance, there’s a certain amount of equity required, and generally, the more you have, the better rates you can get.
• Credit score. Just as when you bought the home, the lender is going to take an in-depth look at your credit. It may be helpful to check your credit score before applying with a lender to see where you’re at and make improvements where you can.
• Debt-to-income ratio (DTI). Lenders love to see low levels of debt. That helps them qualify you for the loan. Generally speaking, 43% or less may be acceptable while 36% or less is ideal.
• Loan-to-value ratio. The home needs to have a sufficient amount of equity to qualify for the loan. You’ll also keep your lending costs lower if you only borrow up to 80% to 85% of the home’s value.
• Closing costs. There are costs involved when refinancing your loan. You may see lenders advertising a no-closing-cost loan, but be sure you know that you may be paying a higher interest rate or fees may be wrapped into the loan. These mortgages aren’t always bad, just know that you should look for the costs of these loans to show up somewhere—and if it’s not a good deal, don’t go for it.

How does mortgage refinancing work?

Replacing an existing mortgage with a new mortgage looks much like when you applied for the mortgage the first time. The basic process for a mortgage refinance goes something like this:

• Shop around for a new mortgage.
• Apply.
• Submit documentation.
• Get an appraisal.
• Close on the loan.
• Your new loan pays off your old loan.
• Start making payments to your new lender.

There are some key differences when it comes to a refinance versus a new mortgage.

Refinancing vs. a purchase loan

Higher equity changes the game. Refinancing when your equity is over 80% so you no longer have to pay for mortgage insurance can save you a lot of money. As a bonus, if you can keep your LTV (loan-to-value) ratio under 80%, you’ll pay less each month—and your refinance will cost less.

You may not need a full appraisal. Automated valuation models (AVMs) and desktop appraisals are more common than they used to be. Instead of waiting weeks for an appointment with the appraiser and then another week or two to get the report, you may be able to get your home valued very quickly.

You still need title insurance. You’ll likely switch title companies with the refinance and need to pay for a new title insurance policy. It’s not fun to pay for, but it is required. It’s also possible this cost can be rolled into the loan.

Closing costs may be rolled into the loan. It’s common to come out from a refinance with lower closing costs than when you initially bought your home. And the costs that you do need to pay for can be rolled into the loan. This is because it’s typical to have more equity when refinancing than buying a home, and the closing costs can be added to the loan amount to make it easy on the homeowner.

You may want to buy down your rate. It’s possible to pay for mortgage points, which can lower your interest rate. If you’re planning to keep the loan long-term, run the numbers to see if it’s worth it to you.

Pros and cons of refinancing

Refinancing may not be as good a deal as you expect, so be sure to consider every angle. Keep in mind that many of the benefits of refinancing stem from possibilities. For true numbers and outcomes, carefully scrutinize the numbers from your lender.

Pros

• Qualify for a lower interest rate. Many borrowers flock to mortgage lenders when rates drop, which could benefit your finances in a big way.
• Get equity out of your home. A cash-out refinance could allow you to tap into your home’s equity. You can receive the difference between the new mortgage and the old mortgage in cash, which you can use for any purpose. A new boat, business venture, or retirement savings—it’s up to you how you want to use it.
• Pay off the home sooner. A shorter term can help you pay off your mortgage faster and save significant money in interest.
• Lower your monthly payment. A lower interest rate—or a longer term on your mortgage—could lower your monthly payment on your home. If your finances need some relief, this might be the right move for you, even though a longer loan term usually means you pay more for the mortgage over the life of the loan.

Cons

• Interest rate could be higher. When you refinance, you’re trading in your existing interest rate for a new one. In today’s high-interest-rate environment, you’re not likely to find an interest rate as low as those available in the past.
• Take longer to pay off the home. If you refinance, you’re resetting the clock on your mortgage-payoff date. If you replace a 30-year mortgage you got five years ago with a 30-year mortgage today, it’s going to take five more years to pay off the loan.
• Pay more in interest overall. When refinancing changes the payoff date, it also changes the amount of time you’re paying on your mortgage. Adding years to your mortgage could end up costing more because you’re paying more interest over the life of the loan.

Different types of refinancing

There are several ways you can refinance your mortgage, including:

• Traditional refinancing (also called rate and term). You’ll replace your current mortgage with a new mortgage at nearly the same loan amount (It may be a little different because of costs that may be rolled into the new mortgage loan). You’ll have a new loan term, interest rate, and possibly a new loan type, and lender.
• Cash-out refinance. A cash-out refinance is when you take out a new mortgage at an amount greater than what you owe and get the difference back in cash. New mortgage - old mortgage = cash out.
• Streamline refinance. If you’re not changing loan types, you may be able to qualify for a streamline refinance. These are government programs (FHA, VA, Fannie Mae, Freddie Mac) with fewer requirements that allow refinancing to a lower interest rate or less costly loan type.

How to apply for mortgage refinancing

Applying for a mortgage refinance can be as simple as finding a lender, such as Warpspeed Mortgage, and submitting documentation. For the best rates, you may want to follow these steps:

• Check your credit report. Since you’ll need to qualify for a mortgage again, you’ll want to demonstrate the best possible credit when you apply to a lender. You can usually find a free source to check your credit, such as a credit card issuer or your bank.
• Check your debt. When you check your credit report, you’ll also see how much debt you have. If you have too much debt, you may not be able to qualify for the loan. Getting your debt down could help you qualify for the loan.
• Calculate the amount of equity in your home. If you want cash out, you may want to see how much you could get. To find the amount of equity in your home, subtract your current mortgage from the market value of your home.
• Shop around for a mortgage. Submit your information to a few different lenders. They should be able to tell you the amount, rate, and term you qualify for. Lenders can also make suggestions to help you make a decision on any number of details involved with the loan.
• Apply. You may need to supply pay stubs, W-2s, tax returns, bank statements, investment account statements, and other documentation to the lender. At first, you may just need the numbers. Typically, you’ll upload the documents at a later point.
• Get a loan estimate. Your lender is required to supply you with a loan estimate within three days of receiving your application (usually it’s much faster). It has the estimated fees and closing costs as well as the new loan terms and monthly payment. You can consent to proceed with the loan after you’ve reviewed the loan estimate and compared it to other offers.
• Submit required documents. You’ll likely upload all the documents into the lender’s online system. You may also have the option of faxing documents to the lender, which was the norm in the past.
• Order a home appraisal. If the initial application is approved, the lender will order a home appraisal. This will give you a valuation of your home, part of determining the amount of money the lender is willing to lend.
• Finalize your loan application. If everything is all good with your application, documents, and appraisal, you should then hear from the underwriter. At this point, they will approve or deny your application—or ask for further documentation.
• Close on your loan. This is the final stage. You’ll receive a closing disclosure that outlines the final fees and costs of the loan. Compare it with the original loan estimate you received and ask about any differences.

When should you refinance your mortgage?

You should only refinance your mortgage in a few scenarios:

• When you can get better terms. One of the most common reasons homeowners refinance is to take advantage of lower interest rates. Your new loan terms should be better than what you already have, unless you have a situation like one of the following.
• To take someone off the mortgage. This is common in cases of divorce where one spouse keeps the house. It’s best to refinance and take the other spouse off the mortgage.
• To shorten the loan term. You can build equity faster if you’re able to shorten the loan term by refinancing.
• To get cash out. If you need money for substantial home improvements or to improve your financial situation, you might want to consider a cash-out refinance.
• To change mortgage-loan types. If you have a mortgage that was intended to be a short-term loan (such as a five- year ARM), but you now need to change to a long-term, fixed mortgage, refinancing will get the job done for you.

When not to refinance your mortgage

Then there are scenarios when it generally doesn’t make sense to refinance your mortgage.

• If you’re planning to move soon. You won’t be able to realize the cost savings if you move soon after and sell the home. The transaction costs of a refinance could outweigh any benefits you’ll see.
• If the terms don’t offer you a better deal. If interest rates are higher than what you’re currently paying, it might be hard to justify a refinance—even if you were hoping to take out cash. Interest rates significantly affect the amount you’ll pay each month, and make a huge difference in how much you’ll pay over the life of a 30-year loan.
• If you don’t have enough equity. Whether property values have declined in your area or you haven’t built up enough equity in your home, if there’s not enough equity, you may not be able to refinance.
• If closing costs are too high. How much you pay for a refinance application is typically much less than a first mortgage, and closing costs reflect that. However, it’s still helpful to calculate the break-even point. The break-even point is how long it takes to cover the closing costs with the savings you realize each month. For example, if you save $50 each month ($600 per year) and have $3,000 in closing costs, it will take five years to break even.

TIME Stamp: Be strategic about refinancing your home

Refinancing is a personal choice based on your unique circumstances, not just advantageous mortgage refinance rates. Do everything you can to get the best rate, such as improving your credit, debt-to-income ratio, buying down your rate, and shopping around for a lender. As we’ve seen from recent history on interest rates, you never know when you’ll keep your mortgage longer than you planned.

Frequently asked questions (FAQs)

What is the best company to refinance your mortgage with?

The best company to refinance your mortgage depends on your credit, income, area, and loan-to-value ratio of your refinance. Many variables go into the interest rates you may be offered. Take the time to shop around for a lender to find the best deal possible for you.

How do I find the lowest rate to refinance?

As noted above, shop around. Be sure to give each lender you’re considering the same information (loan amount, home value, loan type, etc.) so that when you compare loan estimates, you’re comparing apples to apples.

Will refinance rates go down in 2024?

Many analysts are hopeful that interest rates will go down in the later half of 2024, but recent economic data in the form of a strong job market and rising inflation may cause the higher interest rates to linger longer. Recent Federal Reserve statements indicate interest rates may not come down until inflation is closer to 2%.