Is now the right time to refinance?

Bills shaped like house that's up for refinance

For some homeowners, it could still be a good time to refinance, but that opportunity is quickly coming to an end.

Borrowers will indeed pay more than those who took out new loans at this time last year.

But by any historical measure home loans remain incredibly cheap.

If you can shave at least 1 percentage point from your current mortgage rate, then refinancing probably makes sense.

Let's say you have a 30-year fixed-rate home loan that's charging 6.5%.

Refinance at current interest rates, and you'll reduce your monthly payments by around $100 or more a month for every $100,000 you borrow.

The best deal for most borrowers is the one that offers the lowest interest rate, with no points and lender fees of $2,000 or less.

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National Average Mortgage Rates

Source: weekly survey from November 14, 2018

Type of loan Current average Record-low average Established
30-year fixed rate 4.63% 3.50% Dec. 5, 2012
15-year fixed rate 4.07% 2.75% May 1, 2013
30-year fixed jumbo 4.54% 3.54% Sept. 7, 2016
5/1 ARM 4.27% 2.63% May 1, 2013

Our refinancing calculator can help you evaluate any offer more precisely.

It will calculate how much your monthly payment will decrease and how long it will take to recoup any fees and closing costs.

Check out these three refinance options:


1. Refinance with a conventional loan

Property values have increased in most parts of the country, boosting the amount of equity homeowners hold.

The more equity you have — the difference between the balance on your current mortgage and your home's current market value — the easier it is to refinance.

Borrowers with good credit and 20% equity can qualify for a conventional loan, which is the most common, and usually the cheapest, way to go for most borrowers.

The average cost of a 30-year conventional loan was 5.17% in November 2018, according to Ellie Mae, a California-based mortgage technology firm whose software is used by many lenders.

Borrowers who successfully refinanced their homes had an average FICO credit score of 732 and 39% equity.

2. Refinance with an FHA loan

You can refinance with an FHA loan even if you have little or no equity in your home, a much lower credit score or higher debt than lenders usually accept.

The Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development, doesn't actually make loans.

It guarantees that private lenders will be repaid, even if you default. But you'll pay for that guarantee in the form of up-front and monthly mortgage insurance.

With the government standing behind you, banks and mortgage companies can make loans they wouldn't normally offer at competitive interest rates that could cut your monthly payments by hundreds of dollars.

The average cost of an FHA loan was 5.19%. (It's the mortgage insurance FHA loans require, with significant up-front and monthly premiums, that ultimately make them more expensive.)

Borrowers who successfully refinanced their homes with an FHA loan had an average FICO credit score of 660 and 22% equity.

Here's where to learn more about the three most common options for refinancing your home with the FHA's help.

3. Refinance with a VA loan

An even better option is to refinance with a VA loan, which we consider to be the best mortgage program around.

Millions of veterans, as well as anyone on active duty and those in the National Guard and reserve units, are eligible. (Click here for full eligibility requirements.)

With the Department of Veterans Affairs standing behind these loans, they're also less risky for lenders.

That means you can have a lower credit score and less home equity than you'd need for a conventional loan and, in some cases, a higher debt-to-income ratio.

Indeed, you can have no equity and qualify for a new mortgage, and there's never any mortgage insurance required with a VA loan.

The average cost of a VA loan was 4.99%, or about a quarter of a point less than for conventional mortgages.

Borrowers who successfully refinanced their homes with a VA loan had an average FICO credit score of 688 and 10% equity.

Here's where to learn more about the three most common options for refinancing your home with the VA's help.

If you're going to refi, you'll need patience

A little more patience is the one thing you'll need, whatever type of loan you decide to pursue.

Lenders are now taking an average of 46 days to process refi applications.

And before you decide on a lender, make sure you shop around for your the best deals out there.

RATE SEARCH: Find the best mortgage rates.