Current Mortgage Refinance Rates for December 2022

Compare current refinance rates to reduce your monthly payment and save thousands in interest.

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If you’d like a little more guidance as you choose a lender, check out our picks for the best mortgage refinance companies.

What is a mortgage refinance?

Refinancing your mortgage means getting a new home loan to replace an existing one. You typically follow the same steps you did for your purchase mortgage, except your new loan pays off your old loan.

A mortgage refinance can help you save money by:

  • Reducing your interest rate. You aren’t stuck with your existing mortgage rate. A refinance can help you get the best mortgage rates available now.
  • Shrinking your loan term. If you can pay off your mortgage faster, you’ll save big on interest charges.
  • Putting cash in your pocket. A cash-out refinance can do all of the above and give you extra funds to put toward your financial goals.

But before you jump in, make sure you’ve set yourself up for a successful refinance by going in with a goal and a plan.

How to find the best mortgage refinance rates today

A surefire way to find the best refinance rate is to shop around. Choose three to five mortgage lenders and gather quotes to compare refinance rates. Comparison-shopping with multiple lenders may save you thousands in interest costs over your repayment term.

Be sure you also compare the estimated costs and fees with each lender, which can be found on the loan estimate you receive after applying for a refinance. A low rate may sound good at first, but if it comes with high fees it may not actually offer you the best value.

Refinance rate trends

Should I refinance my mortgage?

A useful rule of thumb is that if a refinance can lower your interest rate by 1% or more, it likely makes good financial sense. However, the best way to determine for sure whether a refinance is in your best interest is to calculate your break-even point. To do this, just divide your total closing costs by your estimated monthly savings. The result is the number of months it will take you to benefit from the refinance savings.

For example, if a refinance saves you $150 on your monthly payment but costs you $5,000 in fees, the break-even point would be about 33 months, or just under three years ($5,000/$150 = 33.33). As long as you plan to stay in your home for at least three years, the refinance saves you money.

The Consumer Financial Protection Bureau (CFPB) recommends that you only refinance if you can “break even” within two years. However, as long as you’re planning to live in your home beyond the break-even point, a refinance won’t be detrimental to your finances. The longer you retain the home after refinancing, the more savings you’ll see.

Try using a mortgage refinance calculator to help you crunch the numbers on different refinance scenarios.

Is now a good time to refinance?

With interest rates expected to remain high and continue to rise throughout 2022, it may not be the best time to refinance if you’re looking for a lower rate. However, there are other financially sound reasons to refinance now, including:

  • Getting rid of mortgage insurance because your home’s value has increased. You can get rid of private mortgage insurance (PMI) on a conventional loan if you have 20% equity but, even if you don’t, you may be able to reduce it.
  • Lowering your monthly payment by replacing a 15-year mortgage with a longer-term, 30-year fixed-rate loan.
  • Paying your loan off faster by refinancing a 30-year term to a 10-, 15- or 20-year term.
  • Paying off an adjustable-rate mortgage (ARM) before the ARM rate and payment adjusts higher than current 30-year rates.
  • Tapping your home equity to make home improvements, consolidate debt or buy a vacation home.
  • Replacing a government-backed loan with a conventional loan, to get rid of lifetime FHA mortgage insurance required on loans backed by the Federal Housing Administration (FHA).

How to refinance a home loan

Wondering how the mortgage refinance process works? It’s easy to get overwhelmed by all of the details involved, but follow these six steps and you’ll be well on your way:

  1. Figure out your refinancing “why.” Do you want a lower mortgage rate? Can you afford a higher monthly payment and, in return, get a shorter loan term? Are you ready to borrow from your home equity?
  2. Gauge your financial health. Pull your credit reports and scores. A credit score of at least 740 will typically get you the best rate offers. Budget enough cash reserves to cover your refinance closing costs, which can range from 2% to 6% of your loan amount.
  3. Gather information about your home’s value. Try a home value estimator or contact your real estate agent to help pinpoint your home’s value. The more equity you have, the lower your rate will typically be.
  4. Shop around and apply. Pick three to five refinance lenders and fill out applications with each. FICO, the company behind the credit scores most used in lending, recommends that you complete those apps within a 14-day time frame to minimize the temporary hit to your credit score from multiple hard inquiries.
  5. Lock in your mortgage rate. Once you’ve committed to a lender, get a mortgage rate lock to secure the interest rate you were quoted.
  6. Close on your refinance. Work with your lender to finalize your refinance, submit any outstanding paperwork and schedule your closing date.

Types of refinance loans

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).

  • Rate-and-term refinance loans. This is the most traditional type of refinance and often serves the purpose of changing your mortgage rate and/or repayment term.
  • Cash-out refinance loans. With a cash-out refinance, you get a new mortgage that has a higher balance than what you currently owe on your existing loan. You pocket the difference between the two loans in cash.
  • Streamline refinance loans. The streamline refinance option is exclusive to homeowners with government-backed loans from the FHA, VA or USDA. In most cases, no home appraisal or income documentation is required. To qualify, you just need to currently have an FHA, VA or USDA loan and be able to show that the refinance will benefit you financially.
  • High loan-to-value (LTV) refinance loans. Homeowners with conventional loans who have little to no equity may qualify for a high-LTV refinance. The maximum LTV ratio allowed when refinancing a conventional loan is 97% for a rate-and-term refinance or 80% for a cash-out refinance.

Common minimum refinance requirements

The table below gives you a quick glance at the refinance requirements for credit score, debt-to-income (DTI) ratio and LTV ratio for the types of refinance loans above:

Loan programRefinance purposeCredit scoreLTV ratioDTI ratio
  • Rate and term
  • Cash out
  • 620
  • Rate and term: 97%
  • Cash out: 80%
  • 45% to 50%
  • Rate and term
  • Cash out
  • Streamline
  • Rate and term: 500 to 580
  • Cash out: 500
  • Streamline: N/A
  • Rate and term: 97.75%
  • Cash out: 80%
  • Streamline: N/A
  • Rate and term and cash out: 43%
  • Streamline: N/A
  • Rate and term
  • Cash out
  • Streamline
  • No minimum
  • Rate and term: 100%
  • Cash out: 90%
  • Streamline: N/A
  • Rate and term and cash out: 41%
  • Streamline: N/A
  • Streamline
  • N/A
  • N/A
  • N/A

Frequently asked questions

Because refinance loans require a credit check, the inquiry may drop your credit score by up to five points. When you’re mortgage shopping, try to have your credit run within a 14-day period to avoid a bigger drop from multiple inquiries.

Conventional loan guidelines allow you to refinance at any time after you close, as long as you can prove there’s some financial benefit and aren’t taking cash out. Some government-backed refinance programs require proof you’ve made payments on your current mortgage for at least seven months. If you’re taking cash out, the seasoning period may be up to a year if you want to use your home’s current market value.

You typically need at least 3% equity to refinance your mortgage, unless you’re eligible for a streamline refinance program through the FHA, VA or USDA. There are also programs available for homeowners to refinance an underwater home, meaning their outstanding mortgage balance is higher than their home’s value.

The most notable risks that come with mortgage refinancing include:

  • The appraisal returning a low home value that reduces the benefit of the refinance.
  • Never recovering the costs of refinancing if you sell your home before reaching the break-even point on your closing costs.
  • Losing your home to foreclosure if you go into mortgage default.
  • Extending your repayment term can bring far higher overall interest costs.
  • Wasting your home equity on a splurge rather than improving your finances.
  • Converting unsecured debt into secured debt if you use a cash-out refinance to pay off credit cards or other unsecured debt.
  • Reducing your profit when you sell your home by tapping too much equity.

It takes on average 45 days to refinance a home, according to ICE Mortgage Technology’s most recent Origination Insight Report. Your lender might take more or less time to close a refinance, depending on how much business they have and whether they use a digital mortgage application process.

The total cost to refinance is typically 2% to 6% of your loan amount and is made up of closing costs and fees. The average American borrower paid $2,375 in costs and fees when refinancing a single-family home in 2021, according to a ClosingCorp report. Don’t be fooled by advertisements for a no-closing-cost refinance. These aren’t “free” refinances — the lender covers your upfront costs at closing by charging you a higher interest rate or increasing your loan amount.

While it’s more difficult to refinance a mortgage with bad credit, it’s not impossible. For example, you may qualify to refinance an FHA loan with a credit score as low as 500, provided you have at least 10% home equity. There’s no minimum credit score required for a VA refinance, though many lenders require a 620 minimum.

Mortgage refinance rates tend to mirror purchase mortgage rates. However, refinance rates differ from lender to lender, which is why it’s important to shop around and find a rate that’s competitive enough to replace your current mortgage rate.

Mortgage points are upfront fees you can pay to reduce your mortgage interest rate in set increments. If you’d like to save on interest over the long haul and shave a few dollars off your monthly payment amount, it may make sense to pay for mortgage points. Be mindful that each point costs up to 1% of your loan amount. On a $250,000 mortgage, one point would cost you $2,500 at the closing table.