Best Mortgage Refinance Rates

A mortgage refinance can help you save money with a lower interest rate, a lower monthly payment, or both. Other benefits include lifting private mortgage insurance (PMI), paying off your mortgage sooner, and withdrawing equity (in cash).

Even with all these benefits, a mortgage refinance is not always the right move. For starters, you will incur upfront costs like lender fees, much as you did at loan origination. Make sure the costs and benefits accrue in your favor before deciding.

Frequently Asked Questions

What Is a Mortgage Rate?

A mortgage rate is the interest a lender charges for a mortgage loan. The rate can be fixed, which means it remains the same throughout the loan term. It can also be variable, which means it changes over time in response to shifts in the wider interest rate market. Many mortgage loans start as fixed-rate loans. After several years, the loan converts to a variable rate. 

What Is Mortgage Refinancing?

Put simply, mortgage refinancing is replacing an old mortgage loan with a new one.

The process for refinancing is similar to getting a purchase mortgage. The lender will charge an origination fee and the borrower will have other costs, like a home appraisal. The lender will also ask for financial information and seek out credit reports.

There are several reasons why a homeowner refinances:

• Reducing monthly mortgage payments: Replacing a higher rate with a lower one can shrink your monthly payment. It can also save you money in interest payments over time.
• Switching to a different mortgage type: If you have an adjustable-rate mortgage, you may want to switch to a fixed-rate loan, especially if rates with the refinance are lower.
• Changing the mortgage term: Refinancing to a shorter-term loan to pay off the loan sooner.

All of the above are “rate-and-term” refinances. The lender refinances your loan balance (what you still owe) at a new rate and, likely, a new term.

A cash-out refinance allows the homeowner to withdraw equity—in the form of cash—from the property and replace the loan with a new rate and term. That cash can be used for anything, even major home repairs or upgrades. 

How Are Mortgage Refinancing Rates Set?

Mortgage refinance rates generally move with the wider mortgage rate market. That market moves with the wider interest rate market, which is influenced by actions taken by the Federal Reserve to raise or lower short-term interest rates. (The Fed can directly affect mortgage rates by purchasing (and selling) the bonds issued by Freddie Mac and Fannie Mae, but this happens rarely.) Refinance rate watchers should watch the 10-year Treasury bond, as the two generally move in the same direction.

Also, the mortgage refinance rate a lender quotes you will be influenced by the amount you borrow and your personal financial situation. Borrowers with higher credit scores, higher incomes, lower loan-to-value ratios, and healthier debt-to-income ratios will be offered the best rates.

Does the Federal Reserve Decide Mortgage Rates?

The Federal Reserve doesn’t directly decide mortgage rates, but it does influence them when it changes short-term interest rates. Financial institutions like banks use these rates to borrow from each other, which is reflected in other short-term loans, like personal loans and credit cards.

The Fed’s move is also a signal to investors that the economy may have higher interest costs in the future or higher inflation, which pushes up the yield on longer-term bonds, like the 10-year treasury. Because the 10-year Treasury and mortgage-backed bonds attract the same types of investors, the rate movement of the 10-year Treasury is reflected in mortgage-backed bonds, and ultimately, in mortgage rates.

What Is a Good Mortgage Refinancing Rate?

A good mortgage refinancing rate is one that’s lower than your current one; a rate reduction of just 1% can save you thousands in interest. Try several scenarios with a mortgage loan calculator to see if refinancing works for you. Be sure to include upfront origination costs, too. Will you be in the home long enough to recoup the initial cost of the loan with the reduced interest rate?

Do Different Mortgage Types Have Different Rates?

Different types of mortgages offer different rates. Longer-term loans generally have higher rates (because you’re holding the bank’s money for longer). For example, 15-year mortgages have lower rates than 30-year mortgages (but 15-year mortgages will have higher payments, since you’re paying off the principal sooner).

Adjustable-rate mortgages have different rates from fixed-rate mortgages. ARM rates usually start lower than fixed-rate mortgage rates, but reset after an initial period (five or seven years, for example). A 5/1 ARM has an initial rate for five years, and then the rate is adjusted annually throughout the life of the loan.

Refinance rates are generally 10-30 basis points higher than mortgage rates, according to our analysis of daily rate reports. This is due to differing lender processing costs, risks, and competitive dynamics.

Are Interest Rate and APR the Same?

Though frequently thought of as the same, the interest rate and APR are different charges. The interest rate only includes the interest lenders charge as a cost for borrowing money. The APR includes lender fees and charges besides the interest rates. These fees may include application fees, origination fees, broker fees, closing costs, mortgage points, and any lender rebates. 

The APR tends to be higher than the interest rate because of the additional charges. Borrowers may find that lenders who offer credits or lower fees will have an APR that closely matches the interest rate.

How Do I Qualify for Better Mortgage Refinancing Rates?

You must ensure that your financial situation is in top shape to receive the most competitive rates. 

Here are a few ways to increase your odds of qualifying for better refinancing rates:

• Improve your credit score: Visit AnnualCreditReport.com and get copies of your credit reports. Look for discrepancies and contact the creditor to correct them. The most effective way to improve your credit score is to make consistent on-time payments on all of your credit accounts. That’s because payment history is the most important factor in a credit score.
• Reduce your debt-to-income ratio: This ratio shows the percentage of your gross monthly income you spend on debt—credit cards, car loans, your existing mortgage. The smaller this ratio, the healthier your finances, and the more likely you will be approved for new credit, at the best rates. If your DTI is approaching 50%, you may have a difficult time getting approved for a mortgage refinance. To reduce your DTI, either increase your income or reduce your debt. 
• Build home equity: The more home equity you have, the more lenders believe you have “skin in the game,” resulting in a lower interest rate. Ideally, your equity will increase organically as your home’s value grows and you make regular mortgage payments. You can also increase your equity by “bringing cash to the deal” by making a down payment on your refinance loan. More equity means a lower loan-to-value ratio, which is less risky for the lender.

How Big a Mortgage Can I Afford?

For housing costs to be considered affordable, the federal government says you should not spend more than 30% of your monthly gross income on your mortgage principal, interest, taxes, and insurance (PITI). Many homeowners have housing cost ratios higher than 30%. According to Investopedia’s housing and income data analysis, the median homeowner has a housing cost ratio of around 35%. The amount you can afford to spend depends on your income and your current financial situation.

To calculate your housing cost ratio, simply divide your current monthly housing cost (mortgage payment, plus taxes and insurance) by your current monthly gross income. For example, if your current monthly housing cost is $2,412, and your monthly gross income is $6,946, your housing cost ratio is: $2.412/$6,946 = 34.7%. If you’re considering a refinance loan, run this calculation for both loans to see how it will affect your budget. A mortgage calculator can help you test various scenarios.

What Are Mortgage Points?

Mortgage points or discount points are fees borrowers pay upfront to lower the interest rate on their mortgage or refinance loan.

A mortgage point costs 1% of your loan amount and will reduce your interest rate by a fraction of a percentage point (often 0.25%). Say your refinance loan is for $300,000. You can reduce your interest rate by 0.25% by paying $3,000. The rate discount is small, but it adds up to more than $4,500 over the life of a 15-year loan.

Should I Refinance My Mortgage?

Refinancing your mortgage can help you with a more manageable monthly payment, help you tap into your home’s equity, or reduce the length of your loan. Even with the potential savings, refinancing isn’t for everyone. 

Here are a few scenarios where it would make sense to refinance your mortgage:

• Your financial situation has changed: Maybe your income has gone down, or your credit score has gone up significantly to qualify for lower rates. A refinance can help you get a smaller monthly payment.
• You want to switch mortgage types: Some homeowners near the end of the fixed-rate period of their adjustable-rate mortgage refinance to a new fixed-rate mortgage to avoid fluctuating rates. Some even switch to shorter fixed-rate terms to pay off their home loans faster. 
• You want to cash out your home equity: If you need a lot of cash, for example, to fund a major home renovation, a cash-out refinance can provide those funds, often at a lower interest rate than other types of financing, like personal loans.
• You want to get rid of mortgage insurance: If you didn’t make a 20% down payment on your original mortgage, you likely have to pay mortgage insurance. For many borrowers, the requirement will end automatically after your monthly payments have reduced the loan-to-value ratio to 78% or less. But if your home has increased in value such that the LTV is 80% or less, you can accelerate this process by refinancing to a new loan. 

Refinancing makes the most sense when interest rates are lower than you currently pay. For instance, switching from a 30-year to a 15-year mortgage and taking advantage of the lower rates is worth it, but only if you can comfortably afford the monthly payments.

How We Track Mortgage Refinance Rates

The national averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2025. Use is subject to the Zillow Terms of Use.