Breaking Down Fixed-Rate Refinances by the Years

There’s no denying it: The market is volatile right now. This week saw the rates on 10-year fixed loans tick upward, from 2.25% to 2.375% per a recent report from Fox Business. Despite this, it seems that the three other primary terms are sticking to their guns when it comes to rates, with 15-year fixed mortgages clocking in at 2.375%, 20-year loans at 2.75%, and the classic 30-year fixed holding steady at 3.125%.

For borrowers, this means the time to refinance your mortgage may very well be right now. Ten-year mortgage refinances are usually always the loans with the lowest rates, but right now you can refinance into a 15-year mortgage with the same exact rate as a 10-year fixed.

If you’re thinking of locking in a historically low interest rate, then that 15-year fixed option might just be right for you. You may be able to slash your monthly mortgage payment by hundreds of dollars if not more, according to Fox Business. As for the classic 30-year fixed mortgage, those rates are continuing to hold steady at just over 3%, a mark they have been sitting at for the past week.

30-Year Fixed vs. 20-Year Fixed—Who Wins?

Whether you’re looking for a cash out refinance, or a simple rate and term refi, the 30-year option is always worth taking a look at. With a 3.125% interest rate, you could be looking at a considerably lower monthly payment for decades to come.

If you have a shorter term currently, and opt to refinance into a longer, 30-year option, expect your total loan cost to rise. This is because you’ll be paying more in interest over the life of your mortgage loan despite the lower monthly payments.

If that doesn’t sound like what you’re seeking, you may want to look into the 20-year fixed mortgage option. At a 2.75% interest rate, you could be looking at serious savings with this choice. If you’re currently in a 30-year term, a 20-year fixed rate will not only drop your rate but will also cut your total cost over the life of the loan because your interest payments will drop dramatically. That said, your monthly payment may increase a bit. But it could be worth it in the end.

Perhaps 15 Years or Even 10 Could Be the Answer

The catch here is both the 15- and 10-year mortgage rates currently stand at 2.375%. They’re identical, so this one comes down to personal choice and goals. A 15-year refinance is going to give you way lower interest costs, and a monthly payment you just might be able to live with depending on the size of your loan.

The 10-year mortgage refinance is going to increase your payments when compared to the 15-year option. But your home will be paid off sooner, and you’re going to pay the absolute bare minimum in interest charges with this option. It could be the way to go depending on your current financial situation.

As we mentioned in the beginning of this article, the market is currently quite volatile, with rates fluctuating like crazy (except this past week apparently!) Countless economic factors and indicators affect mortgage rates. Inflation (which is currently climbing) and unemployment (hello, labor shortage!) weigh heavily on interest rates nationwide. Then there’s the biggest X factor: you! Your current employment, savings and income, along with credit score and expenses/debt, will all factor into the interest rate you’re ultimately offered on your refinance.

The Economy Determines All

We already discussed inflation, and the overall strength of the economy (employment numbers, etc.), but there’s also consumer confidence (e.g., spending habits and trends), the housing market as a whole (bidding wars anyone?), the stock market, Treasury yields, the Fed’s agenda, and more.

Then, as mentioned above, there is you! Your credit and debt history, your current FICO score, how much equity is in your home (and your home’s value), your DTI (debt-to-income ratio), the loan you’re seeking, the term, etc., and where your home is! A property in Manhattan is always going to hold a higher value than a property in rural Alaska.

At the end of the day, you’re looking for the lowest rate and payment possible, a.k.a. The Holy Grail. The better you can get your credit, the lower the rate you’ll typically qualify for. So if you can pay down or even payoff a credit card or two, that could be a huge help.

It also helps to shop and compare offers so you’re in the driver’s seat when it comes to negotiations. Freddie Mac states that borrowers save an average of $1,500 over the life of their mortgage just by comparing quotes from one additional lender. Comparing five lenders’ quotes bumps those savings up to $3,000 on average. So do your due diligence, compare quotes from multiple lenders and you could be well on your way to your lowest mortgage payment ever!