30-year mortgage refinance rates: Where they’re heading and how to nab the lowest possible APR
Updated 3:20 PM EDT, Wed September 18, 2024
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If you take out a mortgage when interest rates are high, you might consider a mortgage refinance when rates go back down. Either because of the lower rate or by extending your term, a 30-year mortgage refinance can lower your monthly dues.
While paying less each month on your mortgage sounds attractive, remember that the longer you take to pay off your mortgage, the more interest you pay. Also, the refinancing process includes closing costs (2% to 6% of your loan amount).
Before you change the terms of your home loan, review 30-year refinance rates — they’re likely headed lower after the Federal Reserve’s September policy shift — and learn whether refinancing is right for your situation.
Best mortgage lenders offering 30-year rates
The 30-year repayment term is the most popular option among consumers and is widely available from banks, credit unions and online mortgage companies. Below are the best mortgage refinancing lenders (from CNN Underscored Money’s November 2023 survey). The following fixed APRs are current as of the date of publication.
Our picks at a glance
| Lender | Rating | Minimum credit score | Days to close |
|---|---|---|---|
| Bethpage Federal Credit Union | 5 | 580 | 30 to 45 |
| Guaranteed Rate | 4.8 | 620 | 30 to 45 |
| Better Mortgage | 4.8 | 620 | 32 (on average) |
| Discover | 4.8 | 680 | 55 (on average) |
| SoFi | 4.5 | 620 | 30 to 45 |
| Veterans United | 4.4 | 620 | 45 to 60 |
| CrossCountry Mortgage | 4.4 | 500 | 50 (on average) |
| Rocket Mortgage | 4.3 | 580 | 30 to 45 |
| Pennymac | 4.2 | 580 | 30 to 45 |
| Chase | 4.2 | 620 | Undisclosed |
| loanDepot | 4.2 | Undisclosed | 45 to 60 |
| Guild Mortgage | 4.1 | 540 | 17 (guarantee) |
| AmeriSave Mortgage | 4.1 | 600 | 30 to 45 |
| Ally | 4.0 | 620 | Undisclosed |
| PenFed Credit Union | 3.9 | 620 | 45 to 60 |
Understanding 30-year refinance rates
“Mortgage rates are set by several factors – some in your control, some not,” said Thomas Parrish, a lending executive at BMO Financial Group.
The factors under your control include your credit scores and loan-to-value ratio, or the size of your down payment. Mortgage refinancing lenders see you as a higher risk if you have low credit scores or don’t have a lot of equity at stake — and adjust your rate upward as a result.
The biggest factor outside your control is the economy.
“Mortgage rates rise when the economic outlook points to growth, higher inflation and a low unemployment rate,” said Parrish. “They fall when the economy slows, inflation falls and unemployment rises.”
Through 2023 and early 2024, mortgage rates trended higher because of the Federal Reserve Board’s efforts to reduce inflation. The Fed raised interest rates because higher rates tend to slow inflation. As it approached its 2% inflation rate target, on Sept. 18, 2024, the agency announced cutting the federal funds rate by half of a percentage point (or 50 basis points).
Related: 15-year refinance rates
This rate environment is reflected in mortgage rates, which have risen from about 2.75% at the start of 2021 to 6.20% by mid-September 2024, according to the Federal Reserve Bank of St. Louis.
How are 30-year refinance rates set?
30-year refinance rates are based on factors related to the economy and your individual financial circumstances.
“From a broad view, mortgage rates are impacted by how the economy is doing,” says Ralph DiBugnara, a mortgage lending executive at Cardinal Financial. More specifically, DiBugnara said that inflation, the prime rate and the bond market all impact rates.
“When the economy is struggling, the Federal Reserve lowers the borrowing rate essentially to create more borrowing and more money to stimulate the economy,” DiBugnara added. “When inflation is high and spending is high, the Fed will raise the rate to slow it down.”
Your credit scores, income, LTV and other aspects of your personal finances also impact your rate. In general, the lower the risk you present to a lender — in other words, the higher your credit scores and income and the lower your LTV — the better the rate you can get.
Related >> Compare VA refinance rates
How refinancing your mortgage works
During the mortgage refinance process, you take out a new loan (with a new interest rate and term) that pays off the old one. The biggest driver of refinancing is to get a lower rate, which reduces the monthly payment.
Example: Say you have a $250,000 mortgage tagged at 7.00% and you’re about six years into repaying, forking over $1,800 a month. If you can refinance to a 6.00% interest rate on a 30-year term, your monthly payments would go down to just under $1,500, creating about $300 of room in your monthly budget. (If you secured a 5.00% rate, your payment would be $1,342 each month.)
However, by refinancing in this scenario, you’re extending the time it will take to pay off the loan — and increasing the amount of interest repaid. You’ve already made 75 payments (or nearly six years’ worth) on the old loan, with 285 left. Conversely, with a new 30-year refinance at 6.00%, you’ll make 360 monthly payments, resulting in $26,595 more in interest charges. (With a 5.00% rate, because it’s so much lower than 7.00%, you’d save nearly $30,000 in interest over the life of the loan, even though you’re making 360 payments rather than 285.)
| 7.00% loan | 6.00% refinance | 5.00% refinance | |
|---|---|---|---|
| Remaining payments | 285 | 360 | 360 |
| Monthly payment | $1,800 | $1,499 | $1,342 |
| Overall interest cost | $263,000 | $289,595 | $233,139 |
If you refinance for a shorter period, you can reduce the total cost of the loan and save more money. The following chart shows the difference between refinancing a $250,000 loan balance to various terms. Remember, lenders usually offer lower rates for shorter-term loans.
| Interest rate | Monthly payment | Total cost of repayment | |
|---|---|---|---|
| 30-year fixed | 8.000% | $2,065 | $660,853 |
| 20-year fixed | 7.875% | $2,302 | $497,442 |
| 15-year fixed | 6.875% | $2,460 | $401,419 |
How to get the best 30-year refinance rates
If you’re attempting a refinance to save money, it’s critical to have high credit scores, which can qualify you for a better interest rate. To increase your scores:
- Pay your bills on time
- Bring any past-due accounts up to date
- Limit how much you charge to your credit cards
- Pay down debts, including reducing the balance you carry on credit cards
- Avoid applying for or opening new credit accounts
Your debt-to-income (DTI) ratio, among other factors, will also be put under the microscope when you apply for refinancing. Lenders prefer borrowers with DTIs of 36% and below, but it may be possible to refinance with a 50% or lower ratio. If your DTI is too high, you might not qualify.
If you have enough cash to make up for relatively low credit scores or a high DTI, you could lower the interest rate on your new loan by paying points, which are a form of prepaid interest. One point equals 1% of the loan, or $2,000 on a $200,000 loan.
Compare your monthly savings with the lower rate to what you must pay for points to see how long it would take to break even. If breaking even takes a long time, perhaps longer than you plan to stay in the home, the points may not be worth the upfront cost.
Tip: Compare 30-year refinance rates among several lenders to see who offers the best rates and lowest fees. You have to pay closing costs with a refinance, just as you do with a home purchase loan, so it’s smart to shop around. (Advertised no-closing-cost refinances typically roll the fees into the loan balance or simply charge a higher rate.)
Pros and cons of a 30-year mortgage refinance
| Pros | Cons |
|---|---|
|
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If you can get a 30-year mortgage refinance with a lower interest rate than your current mortgage, refinancing can result in a lower monthly payment. Also, if you want to use some of your home equity for renovations or another big expense, a 30-year cash-out refinance allows you to borrow the money at a lower interest rate than on a construction or renovation loan.
However, a 30-year refinance has some downsides, including having to pay closing costs (again) and extending the amount of time you’re paying off the mortgage. Your equity growth will also slow because most of your monthly payment will go toward interest during the early years of repayment.
Should you refinance to a 30-year term?
If your goal for refinancing is to save money on interest payments, use a mortgage refinancing calculator to compare the total cost of keeping your current loan versus the costs of a new loan. You’ll need to input your current loan balance, your interest rate and how many months of payments you still owe. You’ll also need to know the interest rate on the 30-year refinance loan you plan to borrow, though an estimate could suffice.
Related >> Current mortgage refinance rates
The calculator will show you how much interest you’d pay in each scenario and when you’ll reach the break-even point, or how many months it will take you to recoup the costs associated with the new loan. If you think you might move in a few years, make sure you’ll break even before then. Otherwise, refinancing may not be worth the cost.
You’ll see the biggest savings with a 30-year mortgage refinance when interest rates have fallen significantly from the rate on your current loan, or if your credit has significantly improved since you originally borrowed.
However, not all homeowners refinance simply to save money. There may be other scenarios where a new 30-year refinance makes sense, such as extending your loan term to get a more affordable monthly payment.
| When it might be wise to refinance to a 30-year term | When it might be unwise |
|---|---|
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5 alternatives to refinancing your mortgage
1. Mortgage recasting
What is it? This alternative involves making a large, lump-sum payment on your mortgage. Your lender then creates a new payment schedule based on your new, lower balance. Recasting doesn’t change your rate or term, but it does lower your monthly payments due to your lower principal balance.
Who is it best for? Homeowners who want to lower their monthly payment and have a large lump sum to put toward their loan
Learn more: How to lower your mortgage payment
2. Reverse mortgage
What is it? This type of home loan lets senior citizens borrow money using their home as collateral. Unlike a traditional mortgage, the balance on a reverse mortgage grows over time as the lender makes payments to the borrower. The borrower then repays the loan when they sell or move out of the home (or their estate handles it upon their death).
Who is it best for? Senior homeowners who own their home outright
Learn more: How reverse mortgages work
3. Home equity loan
What is it? It’s a fixed-rate installment loan that’s secured by your home. You receive the loan as a lump sum and repay it via monthly payments. You can use home equity loans for home improvement projects, debt consolidation or other purposes.
Who is it best for? Homeowners with significant equity in their homes
Learn more: Beginner’s guide to home equity loans
4. Home equity line of credit (HELOC)
What is it? A HELOC is a variable-rate line of credit secured by your home. Unlike a home equity loan, you can draw from your HELOC repeatedly throughout its draw period before entering the repayment period.
Who is it best for? Borrowers who want to fund expenses with unknown or variable costs — like home renovations, for example — over multiple years
Learn more: HELOC requirements: What do you need to be eligible?
5. Personal loan
What is it? It’s typically a fixed-rated, unsecured loan used to pay for various expenses. Because it’s unsecured, you don’t need to put up collateral to get a personal loan — but that also means you may face higher interest rates than what you’d get with a secured loan.
Who is it best for? Borrowers who don’t have significant home equity, who are uncomfortable putting up collateral for a loan or who need to borrow a smaller amount
Learn more: How to get a personal loan
How to apply for mortgage refinancing
Applying for mortgage refinancing is similar to applying for a mortgage. But first, you’ll have to determine which kind of mortgage refinance is best for you.
- Determine your goal. Start by determining why you want to refinance in the first place. Do you want a lower monthly payment to free up money for other expenses? Do you want to save money on the overall loan cost? Do you want to replace your adjustable-rate loan with a fixed-rate loan? Or are you weighing a cash-out refinance to pocket some of your equity?
- Choose a refinance term. A 15- or 20-year term may offer lower interest rates than a 30-year term. But shorter terms tend to come with higher monthly payments. On the other hand, a 30-year term will cost more overall but has lower monthly dues.
- Compare lenders and rates. Also consider closing costs, prepayment penalties and secondary features like rate locks. Prioritize lenders that offer pre-qualification (with a harmless soft credit check). Note that you can get loan estimates via mortgage preapproval from multiple lenders with a minimal impact on your credit — as long as you do so within a short window.
- Choose a lender and complete the application. Based on your research and the loan estimates you receive, choose a lender for your refinance. Complete the application, providing all necessary documentation and paperwork.
- Close on the loan. Assuming you’re approved and go forward with your purchase, come to closing prepared to pay closing costs. Before signing, carefully review your closing documents.
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Frequently asked questions (FAQs)
Your cost of borrowing depends on how much lower the new rate is and how long you’ve been repaying your current mortgage. Use a refinance calculator to compare the total cost of the refinanced mortgage with the total cost of continuing to pay your current mortgage.
The requirements for a 30-year refinance are similar to the requirements for getting a home purchase loan. Lenders will base their decision on your credit scores, income, debt level, the value of the home and other factors. For a conventional mortgage, lenders may require a loan-to-value ratio of 80% or less. In other words, the mortgage can’t be for more than 80% of the current value of the property.
You can switch from a 15-year mortgage to a 30-year mortgage when you refinance, although at a higher long-term cost of accruing interest. For short-term costs, monthly payments on a 30-year loan are lower than on a 15-year loan for the same principal amount when they have similar interest rates. Still, you can make extra principal payments to speed up the repayment of your new loan.
Additional reporting by Emily Batdorf
Editorial Disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.
This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.
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