Mortgage Rates
Refinance Rates
FHA Rates
VA Rates
Jumbo Rates
Adjustable Rate Mortgage Rates
Interest Only Mortgage Rates
Non-Owner Occupied Rates
Home Equity Loan Rates
Click to Close
Mortgage Rates
Refinance Rates
FHA Rates
VA Rates
Jumbo Rates
Adjustable Rate Mortgage Rates
Interest Only Mortgage Rates
Non-Owner Occupied Rates
Home Equity Loan Rates
Navigate Section
Refinance to Lower Your Interest Rate

Refinance to Lower Your Interest Rate

  • How Much Lower Should My Interest Rate Be When I Refinance My Mortgage?
  • One of the most common reasons to refinance your mortgage is to lower your interest rate and monthly mortgage payment.  A frequent question that borrowers ask is how much lower than my current interest rate should the new interest rate be for me to refinance?

    It usually makes sense to refinance if the new interest rate is at least .75% lower than your current interest rate.  So if your current interest rate is 5.0%, the new interest rate should be 4.25% or lower.  A reduction in interest rate of .75% or more allows you to reduce your monthly mortgage payment and typically recover your refinancing costs in 30 months or less.

  • Great Mortgage IdeaA good rule of thumb to follow when refinancing is that the new interest rate should be a minimum of .75% lower than your existing interest rate.
  • Please note that different mortgage programs have different interest rates.  For example, the interest rate for an adjustable rate mortgage (ARM) or interest only mortgage is typically lower than the interest rate for a fixed rate mortgage.  Each mortgage programs has pros and cons so be sure to weight the positives and negatives of each type of mortgage before switching programs to reduce your interest rate.

  • Breakeven for a Mortgage Refinance
  • The amount of time it takes you to recover your refinancing costs based on the amount of money you save on your new monthly mortgage payment is called the breakeven point.  For example, if it costs you $2,000 to refinance your mortgage and you save $100 per month by refinancing, the breakeven point is 20 months. $2,000 in costs ÷ $100 per month = 20 months.  You want the breakeven point to be 30 months or less when you refinance your mortgage.

    Borrowers should weigh the benefits of a lower mortgage payment against the costs associated with refinancing.  Spending a lot on closing costs to lower your monthly payment a small amount does not make financial sense while a larger reduction in your monthly payment that enables you to recover your mortgage costs, or breakeven, in a shorter period of time is beneficial for borrowers.

  • Great Mortgage IdeaThe breakeven point to recover closing costs when you refinance should be no more than 30 months.
  • Mortgage Refinance Example
  • The example below illustrates how refinancing your mortgage into a lower interest rate can save you money on your monthly mortgage payment.  For the example below we are holding the mortgage amount constant and assuming that the borrower pays closing costs but does not pay any discount points.  The example demonstrates that by refinancing the borrower is able to reduce his or her monthly mortgage payment by $170 and recover the cost of refinancing in twelve months.

  • CalculatorUse our MORTGAGE REFINANCE CALCULATOR to determine how much you can save and time to breakeven by refinancing
Refinance Your Mortgage to Lower Your Interest Rate
Current Mortgage Refinanced Mortgage
Mortgage Amount $380,000 $380,000
Interest Rate 5.0% 4.25%
Term 30 years 30 years
Monthly Mortgage Payment $2,040 $1,870
Refinance Costs null $1,875
Number of Months to Recover Refinance Costs / Breakeven 12 months

Savings Analysis

Monthly Mortgage Payment Savings $170
Interest Rate Savings .75%
÷ =
Refinance Costs $1,875
Monthly Mortgage Savings $170
12 months to recover refinance costs
  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Compare Refinance Mortgage Rates
    • Lender
    • APR
    • Loan Type
    • Rate
    • Payment
    • Fees
    • Contact
    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.

Get Free Personalized Mortgage Quotes

First Name:
Last Name:
Phone Number:

My Mortgage Info

Mortgage Type
Credit Score
Loan Amount
Property Value
FREEandCLEAR.comThank you for submitting your information!
FREEandCLEAR.comYour mortgage quote request has been sent to our lending partners and you should receive emails from multiple lenders shortly
FREEandCLEAR.comComparing proposals from multiple lenders is the best way to save money on your mortgage!