Following a peak in the fall of 2022, our market specialist anticipates a decrease in mortgage rates for the remainder of 2023. The average rates for a 30-year mortgage are expected to swing between 6% and 7%, as the economy continues to show unexpected strength despite ongoing high inflation.
The U.S. weekly average rates from Freddie Mac’s Primary Mortgage Market Survey, as of July 27, 2023, are as follows:
Refinancing your mortgage may not be a wise decision at the moment unless your current mortgage rate is significantly over 7%. However, there are a few exceptions that could be worth looking into:
If you decide to refinance, ensure that any new loan you're considering will truly benefit you financially, and aligns with how long you plan to stay in your home.
To find the best refinance rate, it's recommended to shop around and consider factors other than just interest rates when choosing a refinancing loan. This includes checking your credit reports and scores, gathering quotes or loan estimates from multiple mortgage lenders, comparing APRs instead of just interest rates, reviewing the "Projected Payments" section of your loan estimate, and budgeting enough cash reserves to cover your refinance closing costs.
Mortgage refinance rates usually fluctuate in sync with purchase mortgage rates, albeit being slightly more costly. However, refinance rates vary from lender to lender, which is why it's crucial to shop around and find a rate that's competitive enough to replace your current mortgage rate.
Refinancing your mortgage means obtaining a new home loan to replace an existing one. A mortgage refinance can help you save money by reducing your interest rate, shortening your loan term, and providing you with extra funds to put toward your financial goals.
However, before you proceed, ensure that you've prepared yourself for a successful refinance by having a goal and a plan.
The pros of refinancing include the possibility of getting a lower interest rate, changing to a shorter loan term, getting a lower monthly payment, reducing or eliminating your private mortgage insurance if your home value has increased, and accessing a large lump sum of cash that can be put toward other financial goals. The cons include having to pay refinance closing costs, pushing out your loan payoff date if you refinance into a loan with the same term as your existing loan, potentially stretching your budget too far if you refinance into a shorter loan term, not breaking even if you move or sell the home too quickly, and reducing the amount of equity you have in your home if you borrow against it when refinancing.
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).
As of May 1, 2023, conventional loan borrowers with certain characteristics may face additional charges or rate increases.
To refinance your mortgage, determine your refinancing "why", gather information about your home's value, apply with at least three to five refinance lenders, lock in your mortgage rate, and close on your refinance.
You should refinance when you're sure to see a long-term financial benefit. You might refinance to get rid of private or FHA mortgage insurance, shorten your loan term, or for many other reasons, but you should only do so if you understand when you'll break even on the refinance and how the changes in your payment amount will affect your monthly budget.