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Today’s 30-Year Refinance Rates
While the year 2020 has been touch and go at points, the low interest rates it brought with it are certainly popular. Right now, 30-year mortgage rates are at a record-setting low, and refinancing is a bona fide trend. Most homeowners are itching to take advantage of those rates to save money on their mortgage loans.
According to research by Freddie Mac, borrowers who refinanced their mortgage in the first quarter of 2020 lowered their rate by about 0.75% and saved close to $2,000 in annual interest payments by refinancing. There’s still plenty of money to save for homeowners who haven’t taken the refi plunge yet, but you need to know what to look for to make the best decision for your needs.
This list of the best lenders for refinancing is compiled using our SimpleScore methodology and it will help you take advantage of 2020’s ultra-low 30-year mortgage rates.
Best 30-year refinance companies
- Best for customer satisfaction: Rocket Mortgage by Quicken Loans
- Best for low APRs: Amerisave
- Best for medical professionals: TD Bank
- Best for no closing costs: U.S. Bank
- Best VA loans: Navy Federal Credit Union
- Best for poor credit: New American Funding
Compare 30-year refinance rates
|Lender||Rates (APR)||Min. Credit Score||SimpleScore|
|Rocket Mortgage by Quicken Loans||2.971%||580||3.4/5|
|TD Bank||Not available||620||3.2/5|
|Navy Federal Credit Union||as low as 3.641%||580||3.4/5|
|New American Funding||Not available||580||4/5|
*30-year fixed rates accurate as of December, 2020.
What is a 30-year mortgage refinance?
Refinancing means taking out a new mortgage with new terms. Your new loan pays off the old one and you’re bound by the terms and rates that come with the new loan. People usually refinance to take advantage of 30-year fixed-rate mortgage rates that are lower than what they got with their original mortgages, which can save homeowners thousands of dollars over the life of a loan.
If you choose a 30-year term for your refinance, you can lock in today’s favorable rates and save some cash. You’ll also be spreading your repayment out over the longest term possible, which means lower monthly payments.
Refinancing requires another full-blown mortgage loan process, though. Expect to jump through all the hoops — and pay all the closing costs — that you did the first time. It’s important to take those costs into account when you calculate your potential savings.
How 30-year mortgage refinances work
Applying for a refinance is almost exactly the same process as applying for a mortgage. When you apply, you’ll need to document your income and assets with paycheck stubs, tax forms and bank statements.
The bank will typically require you to pay for an appraisal, which determines the maximum amount it will lend. You can typically borrow between 80% and 95% of the appraised current value of the house. You can borrow just enough to pay off your existing mortgage, or you can borrow additional funds if you have equity built up in your home, which is called a cash-out refinance.
Extending your mortgage terms
One of the advantages of choosing a 30-year mortgage refinance term is that spreading your payments over 30 years results in much lower monthly payments.
If you originally had a 30-year term and you’ve been paying on it for 10 years, you’ll be pushing your final payment back by 10 years — but you’ll also be spreading a lower loan amount over that term, so your payments will drop dramatically.
If reducing your monthly expenses and improving your cash flow is your goal, extending your new mortgage over 30 years might be a good choice for you.
Lower monthly payments vs. more interest charges
Remember the first couple of years of your mortgage, where a large portion of your payments went to interest? You’ll be starting over again from that point.
Even with a lower interest rate, you’ll be temporarily pausing a lot of your progress with paying down the principal. That’s true no matter what term you choose — but if you choose a 30-year repayment, those smaller payments mean you’ll chip away at the interest more slowly.
That means you’ll be paying significantly more interest over the loan term than you would with a shorter-term, or if you hadn’t opted to refinance.
Pros and cons of a 30-year mortgage refinance
- Lower interest rates
- Lower payments
- Opportunity to cash-out from equity
- Closing costs can be high
- More total interest
How to choose the best 30-year refinance
- Think through your priorities and goals so you know exactly what you want. Do you want the lowest monthly payment? Do you want to spend less money over the life of the loan?
- Consider any special circumstances, like military service or a poor credit rating, that could impact your mortgage.
- Finish building your wishlist with any special features you want. A bank with local branches, automatic payments, online processing?
- Meanwhile, get a copy of your credit report and check it for errors. Look into opportunities to quickly raise your credit score before you submit your application.
- When you start shopping for rates, remember that the advertised rate is only offered to the most qualified buyers. Your rate might be different.
- Narrow your choices down to a few lenders and ask for a pre-qualification to find what your loan rates, payments and terms would be.
- Gather the documentation you’ll need for your application: W-2s, tax forms, bank statements, homeowner’s insurance, etc.
- Pay attention to how each lender treats you when you make inquiries. Does the staff respond quickly, call you back, keep their promises and prioritize your needs? You’re entering a 30-year relationship with this lender, so look for one that treats you well.
[Read: How to Refinance Your Mortgage]