Compare Rates on a 30-Year Fixed-Rate Refinance
Maybe you bought a couple of years ago, when rates were more than 1% higher than the averages we’re seeing today. Maybe you want to refi to cash out some of your equity. Or maybe you have a shorter-term mortgage and you want to refinance into a longer one to get more breathing room into your budget.
Whatever the reason you’re exploring a refinance, it’s important for you to understand exactly what it would mean for you. Let’s get into it.
What does it mean to refinance into a 30-year fixed-rate mortgage?
When you refinance, you replace your existing mortgage with a completely new home loan. You can refi and stay with the same lender, or you can refinance by getting a mortgage with a new financial institution, leaving your current one behind.
When you refinance, you have two options:
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Keep your loan balance roughly the same (rate-and-term refi): Say you owe $200,000 on your current mortgage. You can get a new loan for $200,000 plus closing costs, use it to fully pay off your current mortgage balance, and move forward with the new mortgage.
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Take on a bigger balance and cash out the excess (cash-out refi): If you owe $200,000 but your home is worth $350,000, for example, you have options. You could get a new mortgage for $275,000. $200,000 of that would go toward paying off your current mortgage. After you paid closing costs on your new loan, the remainder of that excess $75,000 would be yours to pocket.
Whether you choose a rate-and-term or cash-out refinance, with a 30-year fixed-rate refinance, you’re locking in a new mortgage with an unchanging interest rate and a balance that you need to repay within three decades.
Pros and cons of a 30-year fixed-rate refi
Choosing this kind of refi comes with some notable upsides, but it’s not without its drawbacks.
Pros of a 30-year fixed-rate refinance
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The 30-year term spreads your loan balance out as much as possible — much longer than with a 15 or 20-year refi. That makes your monthly payments smaller, which helps to keep your refinance affordable.
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Those lower payments improve your debt-to-income (DTI) ratio, which can help you qualify for a better interest rate.
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The fixed interest rate means your principal and interest (P&I) payments won’t change over those 30 years. You can predictably budget for your new loan.
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If you’re refinancing from an adjustable-rate mortgage (ARM) or a shorter-term loan, the 30-year timeline and fixed interest rates should bring you some financial relief.
Cons of a 30-year fixed-rate refinance
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By taking on another loan with a 30-year term, you’re setting yourself up for three more decades of interest accruing. You’ll pay more in interest over the life of your loan than if you chose a shorter-term mortgage.
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A new 30-year mortgage resets the clock. Remember how the early days of your current loan meant primarily paying interest, with only a sliver going toward your principal? You’ll be back in that boat again.
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Smaller monthly payments mean you build equity slowly.
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Refinancing usually means paying closing costs, which probably means thousands of dollars out of your pocket. Even a “no closing cost” refi usually costs you something in the long run, often in the form of a higher interest rate or other fees. Knowing closing cost averages for your state can help you plan here — and see if the refinance is worth it.
How to compare 30-Year Fixed-Rate Refinance mortgage rates
If you only take one piece of advice when you’re getting a mortgage, let it be this: compare rates from at least three different lenders. Doing so can save you thousands of dollars over the life of your loan.
To make it easier for you to put the work in here, follow these steps:
Step 1: Understand your borrower profile
First, you want to get a handle on how mortgage lenders are going to see you. If you look like you’re going to be able to repay your home loan fairly easily, they’ll offer you more favorable conditions. If you look high-risk, you’re going to pay more for your mortgage. Specifically, you’ll be charged a higher interest rate.
So, what makes a borrower low- or high-risk? To decide what kind of loan to offer to you (if any), lenders look at a lot of factors. The biggest ones here include:
- Your monthly income — you don’t want an overly large chunk to have to go toward paying your monthly mortgage bill, which lenders measure with your debt-to-income (DTI) ratio
- Your credit score, which essentially tells them how good you’ve been with managing money in the past
- Your loan-to-value (LTV) ratio (higher is riskier) — the price of the house and your down payment size both come into play here
If you’re not in good shape in any of these areas, putting in some work before you buy (e.g., working on your credit score, lowering your DTI ratio) can help you get a lower interest rate.
Step 2: Use rate tables to see what’s on offer today
There are lots of resources online that show you rate offers from leading lenders. Use a mortgage rate table to get a feel for what kind of interest rates are available from financial institutions that provide home loans in your area.
Ideally, that rate table lets you input personal information, like your credit score and the price of the house you want to buy. This way, the rates you get shown should align with what you’re actually eligible to get. A lot of lenders advertise low starting rates, but only the “best” borrowers will be approved for them once they apply.
Step 3: Get preapproved with three lenders
Once you’ve picked out a few lenders that look good to you, go through their preapproval process. That will mean filling out some paperwork, but it’s the best way to figure out what you can really qualify for in terms of loan size and interest rate.
Have financial documents — like your bank statement and pay stubs — handy to make it easier to complete your preapproval applications.
Step 4: Compare preapprovals
When you get preapproved, the lender should give you documentation about your potential mortgage. Ideally, this gives you a feel for the total amount you’re borrowing, the repayment term, the interest rate, fees, and closing costs.
Line up your quotes from each lender and go through them, paying special attention to the annual percentage rate (APR). This tells you how much you’ll pay each year for the loan including not just interest, but also fees. By looking at APRs, you get a clear idea of what you’ll truly pay if you choose that specific mortgage. This helps you identify the best option for yourself and your financial goals.
If you’re ready to start comparing 30-Year Fixed-Rate Refinance rates, use our rate table to get started. We have fields up top where you can input key details like your credit score range and zip code so we can best tailor the mortgage rate offers to you.