Best Refinance Rates for November 2020

Current mortgage rates have been extremely low since the start of the COVID-19 pandemic, with rates hitting record lows multiple times in the last few months. If you’ve been considering a refinance to lower your interest rate or change your term, this may be a great time to look for the best refinance rates that will save you money on your mortgage. Most experts agree that interest rates will stay low through 2021, but it’s hard to predict what will happen in the future. Mortgage rates fluctuate daily, so you may want to act quickly to take advantage of favorable conditions.

In this article

    Current mortgage refinance rates

    According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current refinance average rates for a 30-year, 15-year fixed and 5/1 adjustable-rate mortgage (ARM) refinance rates among others.

    Product Interest Rate APR
    30-Year Refinance Rate3.080%3.280%
    30-Year FHA Refinance Rate2.900%3.670%
    30-Year VA Refinance Rate2.800%2.990%
    30-Year Jumbo Refinance Rate3.110%3.170%
    20-Year Fixed Refinance Rate2.960%3.200%
    15-Year Fixed Refinance Rate2.520%2.730%
    15-Year Jumbo Refinance Rate2.510%2.550%
    10/1 ARM Refinance Rate3.120%3.950%
    5/1 ARM Refinance Rate3.120%4.090%
    5/1 ARM Jumbo Refinance Rate2.890%4.030%
    7/1 ARM Refinance Rate2.980%3.970%
    7/1 ARM Refinance Jumbo Rate2.940%3.930%

    Rates data as of 11/27/2020

    Why trust The Simple Dollar?

    Research methodology

    The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For mortgage refinancing loans, we compared perks, credit impact to check rates, customer satisfaction, minimum credit score and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a mortgage refinance provider. Be sure to continue your research and shop around for the best mortgage refinance loan that fits your specific needs.

    Covid-19 and the impact on refinance rates

    If you’ve been considering refinancing, this could be the perfect time to make your move. Refinancing rates have been low since the start of the coronavirus pandemic, which means it’s a great time to put some extra cash in your pockets via the savings from the low interest rates.

    As of Oct. 15, the 30-year fixed rates had fallen to 3.130% and the 15-year fixed rates dropped to 2.590% — both of which are extremely low for refinance rates. The 10-year rate was even lower at 2.375% — one of the lowest interest rates we’ve seen for any type of mortgage.

    Rates are expected to remain low for the rest of the year — and perhaps throughout 2021 — but Freddie Mae and Fannie Mac recently added a 0.5% agency fee to all refinance loan closings after Sept. 1. This fee translates to a slight increase in the cost, which will cover “risk management and lost forecasting” during the coronavirus pandemic.

    With consistent record-low interest rates, it’s not surprising that so many people are taking advantage of the chance to snag lower monthly payments by refinancing. At the end of October, mortgage refinances accounted for 66.7% of all mortgage activity in the U.S., according to a survey from the Mortgage Bankers Association (MBA). That’s an 80% increase from October of last year. If you’ve been considering refinancing, this could be the perfect time to make your move.

    As of Nov. 13, the 30-year fixed rates had fallen to 3.100% and the 15-year fixed rates dropped to 2.570% — both of which are extremely low for refinance rates. The 10-year rate was even lower at 2.560% — one of the lowest interest rates we’ve seen for any type of mortgage. Rates are expected to remain low for the rest of the year — and perhaps throughout 2021 — but Freddie Mae and Fannie Mac recently added a 0.5% agency fee to all refinance loan closings after Dec. 1. This fee translates to a slight increase in the cost, which will cover “risk management and lost forecasting” during the coronavirus pandemic.

    Don’t let the fee keep you from refinancing, though. Rates are likely to stay low, and you have a good chance of recouping that fee in the savings from the lower rate you refinance to. Keep in mind, though, that the increased demand to refinance and today’s economic state has translated to stricter loan requirements for borrowers, so you’ll need to make sure you have your finances and documents in order before applying.

    New fee announced mid-August by mortgage giants Fannie Mae and Freddie Mac

    In mid-August mortgage giants, Fannie Mae and Freddie Mac, made an announcement that makes refinancing and the overall closing cost more expensive. Freddie Mac explained in his announcement that the 0.5% Adverse Market Refinance Fee is put in place “As a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”

    To put that into perspective, a fee that is 0.5% of a $200,000 refinance is an additional $1,000.The fee was originally set to start on Sept. 1, but after considerable industry backlash, it was delayed to Dec. 1. Homeowners that haven’t closed on their refinance process before then — even for those who have already started the refinancing process –– will be subject to the fee. It applies for both no-cash-out and cash-out refinancing but does not apply to mortgage loans.

    Keep in mind that the agency fee only applies to mortgages that are intended to be resold to Freddie Mac or Fannie Mae. So before you refinance, you should find out how owns your mortgage. If it’s a direct lender, you may be able to avoid the fee. If not, you can offset the new mortgage fee by shopping around for the best costs and fees associated with refinancing. 

    Just remember the increased demand to refinance stricter loan requirements for borrowers. You’ll need to make sure you have your finances and documents in order before applying.

    Is now a good time to refinance?

    Generally, the best time to refinance your mortgage is when rates are low to help you save money and pay off your mortgage. Getting a rate that’s even half a percentage point lower than your current rate can save you money in the long run.

    “Mortgage application activity was mixed last week, despite the 30-year fixed rate decreasing to 2.98 percent – an all-time MBA survey low. The refinance index climbed to its highest level since August, led by a 1.5 percent increase in conventional refinances,” says Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting in a recent press release.

    The remainder of the year looks just as hopeful for those on the fence. But even though rates are low, there are still predictions that they could slightly increase by the end of the year. The promise of a vaccine from Pfizer is a big win for 2020, though it might cause interest rates to increase. The Fed has stated it’s committed to keeping rates low until 2023, though it just might not be the record lows of the pandemic. But from a historical standpoint, it will still be a fantastic time to refinance. Despite the Adverse Market Refinance Fee, it’s a great time to speak to your lender about the potential savings you’d reap by refinancing now.

    The best refinance lenders for 2020

    Best for minimal fees – Third Federal Savings & Loan

    Third Federal Savings gives one rate for all borrowers and a 60-day rate lock to help guarantee the best rate even when the market fluctuates. However, it’s less forthcoming about eligibility requirements.

    J.D. Power Rating
    N/A
    Min. Credit
    Not specified
    Min. Down Payment
    Not specified
    SimpleScore
    4.5 / 5.0
    close
    SimpleScore Third Federal Savings & Loan 4.5
    Perks 5
    Credit Impact 4
    Customer Satisfaction N/A
    Product Variety 4
    Fees 5

    Third Federal Savings secures your low rate with their 60-day rate lock and offers discounts on loan fees. Their Community Support Lending program gives borrowers an advantage with zero closing costs and lower APRs to keep costs low. They’re best known for offering one rate for all qualifying borrowers to keep home buying fair and less costly.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional purchase loan. For more information on refinance loans, please visit the lender site.

    Best for fast refinancing – Rocket Mortgage

    Rocket Mortgage has the power of Quicken Loans with some of the lowest rates available. It makes home buying and refinancing an easy, streamlined process that’s easy with the help of customer service and their mobile app.

    J.D. Power Rating
    5/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.4 / 5.0
    close
    SimpleScore Rocket Mortgage 3.4
    Perks 4
    Credit Impact 4
    Customer Satisfaction 5
    Product Variety 3
    Fees 1

    Rocket Mortgage makes it easy to refinancing or applying for a mortgage easy online or the mobile app from start to finish. They offer top of the line customer service, competitive mortgage rates and low fees to make buying or refinancing your home stress-free and less costly – even with less-than-perfect credit.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional purchase loan. For more information on refinance loans, please visit the lender site.

    Best 15-year fixed APR – Bank of America

    Bank of America makes it easy to check rates and handle refinancing on the go, making it a strong pick for your mortgage refinance.

    J.D. Power Rating
    3/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Bank of America 3.8
    Perks 5
    Credit Impact 3
    Customer Satisfaction 3
    Product Variety 4
    Fees 4

    Bank of America makes the refinancing process less stressful by giving borrowers easy to understanding lending terms. If you’re looking into a 15-year fixed mortgage, you’ll have the option to choose a cash-out loan to have extra money in the future for extra savings, home repairs or to help with closing costs.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional purchase loan. For more information on refinance loans, please visit the lender site.

    Understanding mortgage refinance

    What is a mortgage refinance?

    A mortgage refinance is the process of taking out a new mortgage loan with new terms and/or a new interest rate. This new loan “pays off” your old loan and you adhere to the new terms, repayment schedule and other requirements of the new loan. Refinancing your mortgage loan is a common thing to do, especially if rates drop significantly and you want to save money on interest.

    You can refinance your loan with a new lender or stick with your current lender. You can also change the type of loan you have with a refi, opt for a different rate or opt for a shorter or longer loan term when you refinance.

    The process is similar to the one you went through when initially securing the loan for your home, meaning that you’ll have to go through the full application process and show proof of your financials and other info, but it can deviate in some cases. For example, some refinances are streamlined, which means that you won’t need to get a new appraisal and the process will be less strenuous than it is in other cases. You’ll also owe a new round of closing costs at your loan closing. Closing on a refi can happen in a matter of weeks or take as long as a couple of months from when you apply for your loan.

    Why refinance your mortgage?

    It’s common for people to transfer their balance from a credit card with a high interest rate to one with a lower interest rate, resulting in a more manageable monthly payment and a bit more breathing room in their budget. Refinancing your mortgage at a lower rate can allow for the same thing on a bigger scale. You may also want to refinance to obtain a shorter loan term or a different type of mortgage.

    Whatever your reason, refinancing can save you money in the short term, the long term, or sometimes both.

    When should you not refinance?

    There are a number of scenarios in which you shouldn’t refinance. If you have less than 20% equity on your home lenders may be skeptical to refinance you because the loan will seem less risky, especially if you don’t have enough for a sizeable down payment or closing costs. Most importantly, you’ll want to make sure that the long term costs don’t outweigh the savings you expect. Sometimes a lower monthly with a longer loan term could cost you more in interest over the course of the loan.

    A few other reasons you might want to wait to refinance is if you have a low credit score, cannot afford closing costs or if you don’t plan on staying in the home for more than three years – otherwise you won’t break even on the refinancing costs.

    Most importantly, you’ll want to make sure you’re getting the best interest rates so watch the market closely and reach out to your lender for questions.

    Types of mortgage refinancing

    If you’re looking at refinancing now there are three types of mortgage refinancing options to consider. Remember, each refinancing option depends on your financial situation and it’s best to speak with your lender about the terms and conditions before making a decision.

    • Rate and term finance – Changing your loan terms or refinancing your existing mortgage loan for a lower interest rate. Rate and term refinancing is better known as a no-cash-out refinance because new money is not being added to the loan. This refinancing option is most common when there are low-interest rates. It is often used to lower monthly payments with a lower rate, but could also mean a longer mortgage term.
    • Cash-out refinance – Homeowners who choose this option will be replacing their current mortgage loan with a new loan that gives them more money. They’ll be able to use the difference between these two loans as cash for renovations or to consolidate debt. Since you’re increasing the overall loan amount you can expect higher interest rates than rate and term financing. Oftentimes, you can borrow up to 80 percent of the home’s value in cash, but it’s best to check your lender’s cash-out refinancing terms and options.
    • Streamline refinance – Streamline refinancing is only for homeowners who have a HARP, FHA or VA mortgage loan. These programs may exempt certain verification requirements during the refinancing process. You may be able to bypass credit checks or income verification, making the process faster with less paperwork since this option does not let you change loans when using streamline refinancing. This option may be best for homeowners looking to reduce their monthly payments and have a lower interest rate.

    How do refinance rates differ from mortgage purchase rates?

    It’s a common mistake to assume that refinance rates are the same as mortgage purchase rates, but these two types of loans are different and each comes with its own set of rates. The upside is that right now, rates on refinances and purchase loans are low across the board, so there isn’t much of a difference between the two. In normal times (when the economy is strong or when we aren’t in the midst of a pandemic), the rates between these two loan types can vary greatly.

    For example, as of Oct. 16, 2020, the benchmark 30-year fixed refinance rate was 3.130% and the average 15-year fixed refinance rate is 2.590% with an APR of 2.790%, according to Bankrate’s latest survey of the nation’s largest refinance lenders. The 5/1 adjustable-rate refinance (ARM) rate was 3.190%.

    On the other hand, mortgage purchase rates for 30-year fixed mortgages was averaging 3.020% as of Oct. 16, which was just slightly lower than the refi rates. The average 15-year fixed mortgage rate was 2.540%, which was just under the refi rate. The 5/1 adjustable-rate mortgage (ARM) rate was 3.080% — which was also just slightly lower than the refi rate for a 5/1 ARM.

    The differences between the two are negligible currently, but that could change on any given day. Rates are pretty unpredictable right now, in part because they’re not only dictated by the economy but also by demand from consumers. Since refis are more popular right now, the rates are slightly higher. If demand drops, you might see the rates drop slightly in turn. Either way, these rates are extremely low compared to the rates we were seeing just one year ago.

    Closing costs for refinancing

    Many may not know, but refinancing comes at a cost. You’ll want to factor in similar fees to when you first financed your home. That includes fees including appraisal fees, credit reporting fees, taxes, attorney costs and more. Freddie Mac’s refinancing breakdown shared that some closing costs total an average of $5,000. The costs will depend on a number of factors including your loan balance and the type of refinancing option you’ve chosen. It may also depend on state taxes and local costs.

    When does refinancing into a 15-year mortgage make sense?

    The only way to really know if you should refinance to a certain type of mortgage will be to weigh your goals, financial picture, ideal outcome and other factors. However, there are ways to know whether or not you should refinance into a 15-year mortgage.

    The first, and arguably most important, is to weigh whether you can afford much higher payments. If you’re struggling to make the mortgage payments on a 20- or 30-year loan, you will certainly struggle by refinancing to a 15-year loan. That’s because you’re shortening the loan term significantly, which means you have less time to pay off your loan.

    That said, you can save a ton of money on interest with this type of loan, so if you do the math and can afford the payments, you might want to consider it. Not only are the rates on 15-year loans lower in general, but you’ll pay interest for less time in total, too — saving you tons of money compared to loans with longer terms.

    The only way to know for sure, though, is to do the math, compare the loans, assess your goals and talk to some lenders. They’ll be able to give you more insight on whether it’s the right move with your finances.

    How to get the best refinance rates

    There’s little magic involved in getting the best mortgage refinance rates. Like most other financial decisions, you’ll need to do a little research and some comparison shopping. If your finances aren’t in top shape, you may also need to put in some hard work to raise your credit score and reduce your debt load before refinancing.

    Step 1: Do the math.

    Before you shop for mortgage refinance rates, play with the numbers using a refinance calculator. Selecting a shorter mortgage term can lower your interest rate, saving you much more in the long run and getting you out of debt faster — but it will also boost your monthly payment. You’ll want to decide what you can comfortably afford before a lender tries to make that decision for you.

    Let’s say I originally obtained a conventional 30-year, $250,000 mortgage five years ago at an APR of 5.50%, and my current balance on the mortgage is now $230,000. Here’s what the numbers could look like according to new loan terms and average refinance rates, assuming $2,000 in closing costs (keeping in mind that shorter loan terms usually come with lower APRs):

    If getting the lowest interest rate is my top priority, that 15-year term looks pretty sweet — and so does saving more than $119,000 in interest over the long run. But I’ll need to cough up an extra $282 a month.

    Step 2: Make sure your credit is in top shape.

    Your credit score will affect the interest rate you receive just as much as it did when you obtained your original loan. For that reason, refinancing will often provide the greatest benefit for anyone who has seen their credit score climb since getting their mortgage.

    Wondering how much your credit score can affect your refinance rates? According to myFICO estimates, someone refinancing a conventional 30-year, $300,000 loan with excellent credit would receive an average APR of 4.125% as of March 2018. Meanwhile, someone with only fair credit would see an average rate of 5.714%. The excellent-credit borrower would pay almost $300 less per month. Here’s a more detailed breakdown:

    If your score is lower than 620, you’ll have a tough time refinancing with most traditional lenders. Credit unions and local banks may offer a bit more wiggle room than bigger banks, but your chances of approval will be much better (and your APR much lower) if you take time to focus on raising your credit score first.

    Step 3: Chip away at your debt.

    Your credit score isn’t the only thing helping to determine your interest rate. Lenders also want to make sure you aren’t burdened by too much debt — after all, if you can’t keep up with your credit card payments, your mortgage could be next.

    The number they’ll look at is your debt-to-income ratio, or DTI, which is simply the percentage of your gross income that your debt payments will eat up — those include student loans, car payments, and minimum payments on your credit card balances, as well as your potential mortgage. Someone earning $4,000 a month with total debt obligations of $1,000 a month has a DTI of 25%.

    DTI requirements vary by lender, but most will want to see a maximum of around 43% DTI — and lower is better. So if you have a monthly gross income of $6,000 a month, you would want to make sure no more than $2,600 is being used to pay off debt.

    If your DTI isn’t looking so hot, it may be time to form a game plan to help you reduce your debt load. Simple debt-reduction strategies like paying more than the minimum every month can ultimately reduce your DTI and put you in a better position to refinance mortgage rates.

    Step 4: See if Uncle Sam will help.

    If you  have an FHA loan, you might be eligible for the FHA Streamline Refinance, which doesn’t require a new home appraisal for you to obtain a lower interest rate. For that reason, the program can be enormously beneficial for those with homes that have dropped in value.

    Step 5: Don’t forget about closing costs and fees.

    Whether you’re buying or refinancing, there’s nothing cheap about getting a mortgage. There are application fees, home appraisal fees, attorney’s fees, survey fees, title searches — the list of things you may pay for to refinance is long, and will probably cost at least a few thousand dollars by the time it’s said and done.

    Because closing costs and fees are not exactly insignificant (they average about $2,000 or more on a $200,000 loan, depending on the state you live in) be sure to decide whether it makes the most sense to pay cash at closing or add them to your loan. The former is ideal for anyone who wants to pay the least long term, while rolling them into the loan might be the better option for someone who doesn’t want to dip into savings.

    Another option is a “zero closing cost” mortgage, where you may pay a slightly higher interest rate in exchange for your lender ponying up at closing. Again, this makes the most sense for someone who doesn’t have the cash on hand for closing costs or who might not stay in their new home long enough to recoup those costs and start benefiting from lower home refinance rates. If you’re aiming to stay in your home long term, you’ll probably pay more going this route.

    The impact of COVID-19 on your refinance rates.

    The real estate market is changing due to the COVID-19 pandemic, and those changes extend to both traditional mortgage loans and refinance loans. To stimulate the economy, the Federal Reserve made two mortgage rate cuts in March and another one in February, setting a federal fund rate to a range of 0% to 0.25%. These Fed Rate tweaks resulted in lenders dropping mortgage refinancing rates to record-breaking lows, which has driven an increased interest in refinancing by homeowners looking to save money on interest.

    Today rates on mortgage refinance loans are at or near a record low. Refinancing rates fluctuate with the increased demand, but overall, they’ve stayed lower than they have been in the last decade. Homeowners who have been considering a loan refinance may be able to cut the total interest costs on their loans significantly by refinancing to a new loan right now.

    But, while refinancing rates are very low right now, lenders have tightened the requirements for borrowers in recent months due to the economic downturn caused by COVID. There are plenty of lenders who will work with borrowers who don’t have perfect credit or a low debt to income ratio, but you’ll need to do your homework to find one that works for you. The pandemic has made the lending atmosphere that’s both potentially lucrative for homeowners and potentially frustrating for borrowers, so make sure you work to find the best lender for your needs.

    Methodology

    SimpleScore

    We’ve created the SimpleScore to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore

    We break down each of these five factors and their rating criteria for our review of the best mortgage companies.

    Why do some brands have different SimpleScores on different pages?

    Some brands like Bank of America, Wells Fargo, and Chase have different SimpleScores because they offer more than one financial solution — like home loans, auto loans, personal loans and more.

    For instance, in our Bank of America Mortgage Review, we give the company a 3.8 out 5 based on our five rating factors for mortgages. In our Bank of America Auto Loans Review, we give the company a 4.4 out of 5 based on our rating factors for auto loans. By tailoring our SimpleScore to each financial solution, we’re able to give you a more accurate view of a brand’s services and how it compares to competitors’ services.

    Perks

    Mortgage lending companies that provide more perks receive a higher score from us.

    Hard/Soft credit checks

    We know that credit checks affect your score –– that’s why we favor companies that offer soft credit checks or hard credit checks when you want to see your pre-approval rates.

    Customer satisfaction

    We use the J.D. Power 2019 Mortgage Origination Satisfaction Study℠ to find out how customers rate their experience with each company. (If a company is not included in J.D. Power’s study, we skip this rating factor and average the remaining factor scores.)

    Product variety

    Mortgage lenders that offer more products for their home loans are given higher scores.

    Fees

    Fees can add up fast. Companies that don’t require as many fees for your home loan receive a higher score with us.

    Saundra Latham

    Contributing Writer

    Saundra Latham is a personal finance writer and editor. Her work has appeared in The Simple Dollar, Business Insider, USA Today, The Motley Fool, Livestrong and elsewhere.

    Reviewed by

    • Angelica Leicht
      Angelica Leicht
      Editor

      Angelica Leicht is a writer and editor who specializes in everything mortgage-related for The Simple Dollar. Her work has spanned topics that include lending product reviews, interest rate trends, racial biases in mortgage lending and the role of fintech in lending practices, and has appeared in publications such as Interest, Bankrate, The Spruce, Houston Press and VeryWell, among others.