10-year fixed refinancing rates | fox business
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When you first took out your mortgage, the repayments on a 10-year fixed rate loan may have been too high for your budget. But if you’ve paid off enough of your current mortgage balance, refinancing to a 10-year term could help you pay off your home faster and save a lot of interest.
Indeed, in the second quarter of 2021, 30% of borrowers shortened the term of their loan when refinancing, according to Freddie Mac. Here’s what you need to know about 10-year refinance rates.
Credible, it’s easy to view your prequalified refinance rates in minutes.
Current Trends in 10-Year Mortgage Refinance Rates
Here’s how mortgage refinance rates have changed over the past 12 months.
Here’s what the average annual mortgage interest rate looked like over the past three decades.
Changing economic conditions, central bank policy decisions, investor sentiment and other factors influence the movement of mortgage rates. Credible’s average mortgage rates and mortgage refinance rates are calculated based on information provided by partner lenders who pay compensation to Credible.
The rates assume a borrower has a credit score of 740 and is borrowing a conventional loan for a single-family home that will be their primary residence. Rates also assume no (or very low) discount points and a 20% deposit.
Credible mortgage rates will only give you an idea of current average rates. The rate you receive may vary depending on a number of factors.
Credible, it’s easy to compare rates from multiple lenders in a few minutes.
Benefits of a 10-year mortgage refinance
Refinancing with a 10-year mortgage has several advantages:
- A lower interest rate — Current mortgage refinance rates are relatively low and chances are they will be lower than your current mortgage rate. Ten-year rates also tend to be the lowest available, so refinancing your maturing mortgage could mean you get a significantly lower interest rate.
- Faster loan repayment — By refinancing a 10-year mortgage, you could reduce the time it takes to own your home. Mortgage debt is often the biggest expense for a household, so eliminating this debt will make a big difference to your budget.
- Potential Overall Savings — By pay off your mortgage sooner, you could save a lot of money by eliminating the interest that comes with your mortgage payment. For example, if you take out a 30-year mortgage at 4% interest to buy a $250,000 house, you will pay $179,674 in interest over the life of the loan. But let’s say you’ve paid your balance down a little to $240,000 and are refinancing into a 10-year loan at 3% interest. The total interest on this 10-year refinance is only $38,095, a savings of over $140,000.
- Possibility to recover money — When you refinance a mortgage, you can get cash refinance to leverage the equity in your home. You can use the money to make repairs or improvements that will add value to your home.
Disadvantages of a 10-year mortgage refinance
You’ll also want to consider some possible downsides of refinancing into a 10-year mortgage:
- Higher monthly payments — Shorter mortgage terms usually come with higher monthly payments. In the scenario described above, refinancing your 30-year mortgage to a 10-year loan would increase your monthly mortgage payments from $1,194 to $2,317. When you reduce the term of your loan, your monthly mortgage payment will likely increase.
- Closing costs – When you refinance a loan, you usually pay closing costs, which can amount to a few thousand dollars. You may be able to build these costs into the loan.
- It may not be worth it – First you need to calculate what your potential savings would be if you refinance a 10-year mortgage. Unless you will benefit financiallyit may not be worth refinancing.
- Reduction in home equity — If you opt for a cash-out refinance, any money you take out means you lose that much equity in your home.
When is the right time to refinance?
Many factors determine whether it’s the right time for you to refinance your mortgage. As a general rule, however, refinancing can be a good decision if you can get a new mortgage interest rate that’s at least 0.75% less than your current mortgage rate.
Refinancing can also be a good idea if you have an adjustable rate mortgage that is about to be reset. While ARMs can start out with a very low interest rate, when the rate resets, your interest charges can skyrocket. Refinancing into a fixed rate mortgage could be a way to protect yourself against future rate hikes.
Some factors that affect the refinance rate you will get are beyond your control. But there are several steps you can take to ensure you get the best refinance rate available to you. Here are a few :
Save for closing costs
In addition to saving for a down payment, it’s also a good idea to save for closing costs, which can reach an average of $5,000, depending on Freddie Mac.
Refine your credit
Just like when you bought your home, your credit score and history affect your refinance rate. So it’s a good idea to make sure your credit is in the best shape possible.
Check your credit report for any errors, such as incorrect information or duplicate accounts. Pay off as many other debts as possible to improve your debt-to-income ratio and pay down your credit card balances to reduce your use of credit.
Just as you would compare quotes from multiple vendors for an expensive repair to your home, you should review loans and mortgage interest rates from multiple lenders. In fact, getting five quotes could save you $3,000 over the life of your mortgage, according to a Freddie Mac Poll.
You will typically face fees when refinancing your mortgage – $5,000 on average, according to Freddie Mac.
Your exact refinance costs will depend on several factors, including your loan amount and where you live. Typical refinance costs include:
- The cost of registering your new mortgage
- Expert fees
- Lawyer’s fees
- Lender fees, such as origination or underwriting
- Title Service Fee
- Credit application fees
- Mortgage points
- Prepaid interest charges
Keep in mind that there is no such thing as a truly no-cost refinance. Lenders who market “no-fee loans” usually charge a higher interest rate and build the cost into the loan, which means you’ll pay more interest over the life of the loan.
What credit rating do you need to get a good 10-year refinance rate?
Your FICO score is a measure your mortgage lender uses to determine whether they will give you a loan and, if so, what your interest rate will be. Note that it is often advantageous to shop around lenders to get the most competitive rates. FICO scores are broken down as follows:
- 800 and more — Your score is considered outstanding and you should qualify for the best interest rates available.
- 740 to 799 — If your score is in this credit bracket, you have very good credit and will likely qualify for better rates.
- 670 to 739 — Your credit score is considered good. You should be eligible for a loan, but you might not get the best rate.
- 580 to 669 — With credit that’s just considered fair, you might have trouble getting loan approval, and if you get a mortgage, you can expect to pay a higher interest rate.
- 579 and under — Your score is well below the average credit score. Lenders may consider you a subprime borrower and it may be very difficult to qualify for a loan.
Checking your prequalified rates on Credible does not affect your credit score.