Mortgage Refinance Rates: How They Work and When to Lock

How Refinance Rates Differ from Purchase Rates

Refinance rates are often slightly higher than purchase rates, but homeowners with credit scores over 740 may qualify for similar rates. This difference reflects the additional risk and paperwork for lenders, though a strong credit profile can help narrow the gap.

The national averages can give you a baseline. As of July 2026, the average 30-year fixed refinance rate was 7.01% and the average 15-year fixed refinance rate was 6.13%, according to Curinos data cited by Experian. Compare that with the average 30-year fixed refinance APR of 6.91% and 15-year fixed APR of 6.27% reported by Bankrate on July 30, 2026 (APRs include lender fees, which is why they can differ from interest rates).

• Lenders often price refinance loans slightly higher than purchase loans, but a credit score above 740 can put you on par with purchase-rate pricing.
• Your rate is personal: it depends on your credit score, debt-to-income ratio, loan amount, and the equity you have in your home, in addition to market conditions.
• Shorter-term loans, such as a 15-year fixed, typically come with lower interest rates than longer-term loans.

Sources: Experian, Consumer Financial Protection Bureau, Bankrate

Break-Even Analysis: When Refinancing Pays Off

Refinancing typically involves closing costs (about 2% to 6% of the loan amount) that must be recouped through monthly savings before the refinance becomes beneficial. The break-even point is the time it takes for your monthly savings to cover those upfront costs.

A significant rate reduction can make a difference. For example, a drop from 7.25% to 6.5% on a $400,000 loan with a similar term would save about $200 per month. If rates eased to 6.5%, about 2.5 million borrowers could refinance and save at least 75 basis points, according to a CFPB analysis of ICE Mortgage Technology data.

The larger the rate drop, the faster you break even. If rates fell to 5.5%, more than 7 million borrowers could potentially refinance, and over 5 million of those candidates had gotten their mortgages in the past three years, per the same CFPB analysis.

• Calculate your total closing costs (typically 2% to 6% of the loan amount).
• Estimate your monthly payment savings with the new rate.
• Divide total costs by monthly savings to find the break-even period in months.
• If you plan to stay in the home beyond that period, the refinance may be worth it.

Sources: LendingTree, Consumer Financial Protection Bureau, Rocket Mortgage

Factors That Affect Your Refinance Rate

Your refinance rate is influenced by both market conditions and your personal financial profile. The CFPB outlines several key factors that determine your mortgage interest rate, and the same principles apply to refinancing.

Credit score is one of the most important: borrowers with higher credit scores generally receive lower interest rates. Your debt-to-income ratio, loan amount, and the amount of equity you have also matter, as does the type of loan term you choose.

In today's rate environment, many refinance borrowers also pay discount points—a one-time fee paid at closing to a lender in exchange for a lower interest rate. One point equals 1% of the loan amount. When mortgage rates were around 7.3% in September 2023, 87.4% of cash-out refinance borrowers paid discount points, compared to 61.2% when rates were around 2.6% in January 2021, according to CFPB analysis of HMDA data.

• Credit score: higher scores typically lock in lower rates.
• Debt-to-income ratio: a lower ratio generally improves your rate.
• Loan amount and property value: the loan-to-value ratio affects pricing.
• Loan term: shorter terms (like 15-year) usually have lower rates than 30-year terms.
• Discount points: paying points upfront can reduce your interest rate.

Sources: Consumer Financial Protection Bureau

How to Compare Refinance Offers

When you shop for a refinance, compare the annual percentage rate (APR) as well as the interest rate. The APR includes lender fees and other costs, giving you a more complete picture of the true cost of the loan.

Look at the total closing costs and how they fit into your break-even analysis. A loan with a slightly higher interest rate but very low fees might be a better deal if you plan to move soon. Conversely, a lower rate with higher points could make sense if you'll stay for many years.

Use the comparison table below to see how a 30-year and a 15-year fixed refinance compare at recent average rates.

• Compare at least three lender quotes, including APRs and all fees.
• Ask each lender for the same loan amount, term, and rate lock period.
• Check whether discount points are included or optional.
• Consider the lender's customer service and reputation, not just the rate.

Sources: Experian, Bankrate

Steps to Refinance and Lock in a Rate

Refinancing follows a similar process to getting your original mortgage, but it's streamlined because you already have a loan. Here's a typical sequence:

1. Check your credit report and score. A higher score can help you get a better rate.
2. Determine how much equity you have in your home—this is especially important for cash-out refinances.
3. Shop around and compare offers from multiple lenders, focusing on APR and closing costs.
4. Choose a lender and submit your application with required documents (income, assets, property info).
5. Lock your interest rate when you're satisfied with the offer. A rate lock holds the rate for a defined period, typically the time you expect to close.
6. Complete the underwriting and appraisal process.
7. Close on the new loan, pay any closing costs, and the old mortgage is paid off.

Sources: LendingTree, Rocket Mortgage, Consumer Financial Protection Bureau

Common Mistakes to Avoid When Refinancing

Refinancing involves significant costs, so it's important to avoid pitfalls that could make it a poor decision.

One common mistake is focusing only on the interest rate and ignoring closing costs. A lower rate might come with high fees that extend your break-even period. Another is choosing a cash-out refinance when you could achieve your goal with a more affordable option—cash-out refinance borrowers tend to have lower incomes and credit scores, and they may face higher costs.

Also, be cautious about stretching your loan term to lower your payment. If you've been paying your mortgage for several years, refinancing into a new 30-year loan could reset the clock and cost you more in interest over time.

• Don't ignore fees; calculate the total cost, not just the rate.
• Avoid refinancing if you plan to move before you break even.
• Don't extend your loan term unless you have a clear reason—reset interest can be costly.
• Consider whether a cash-out refinance is necessary; it often comes with higher rates and costs than a rate-and-term refi.

Sources: Consumer Financial Protection Bureau, LendingTree

Side-by-side category

Refinances generally fall into two categories: rate-and-term refinances and cash-out refinances. A rate-and-term refi changes your interest rate or loan term without adding to your principal. A cash-out refinance replaces your existing mortgage with a new, larger loan, allowing you to tap home equity.

Cash-out refinances became more common than non-cash-out (rate-and-term) refinances after interest rates increased rapidly in 2022, according to CFPB research. Cash-out refinance borrowers had lower median credit scores and lower median incomes than non-cash-out borrowers from 2013 to 2023.

Sources: Consumer Financial Protection Bureau, LendingTree