Are Refinance Rates the Same as Mortgage Rates?

Here are today’s 30-year fixed mortgage (purchase) and refinance rates. See the difference?

How we source rates and rate trends

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Rate data in the charts and tables above comes from RateUpdate.com. The displayed rates come from multiple providers and represent market averages. Your mortgage rate will differ based on individual factors like your credit score as well as differing loan types and terms offered by lenders.

Why are mortgage and refinance rates different, and what can homeowners do to get a better deal when refinancing their loan?

Highlights

• Refinance rates are generally slightly higher than mortgage rates for home purchases, often due to the increased risk and less competitive refinance market.
• Even with higher rates, there are scenarios where refinance APRs might be lower due to differences in closing costs and fees, especially with government-backed loans or shorter-term adjustable-rate mortgages.
• Your credit score, debt-to-income ratio, built-up equity, and loan length all play significant roles in determining the refinance rates you’re offered.
• To secure the best refinance rate, borrowers should improve their financial profile, shop around with multiple lenders, and compare loan estimates to ensure they get the most favorable terms.

Refinance Rates vs Purchase Rates

Are refinance rates the same as mortgage rates? Not exactly. In this case, the term mortgage is being used to refer to purchase loans. These are the mortgages you take out when you buy a home.

While interest costs are generally similar, refinance rates tend to trend slightly higher than purchase rates.

Today’s rates as reported by Refi.com mortgage rates tracker are as follows:

Why Are Refinance Rates Typically Higher?

So why are refinance rates higher? Numerous variables impact mortgage rates, but some of the most common reasons refinance loans cost more than purchase loans are:

1. Refinances are generally considered riskier than purchase loans, especially when they involve cashing out existing equity.
2. The purchase loan market is more competitive, and lenders must offer lower rates to attract business.
3. Most refinances involve borrowers lowering their interest rates and monthly payments. A lender can increase their profits by charging more, and the homeowner will remain happy because they’re still saving money.

Are Refinance Rates Always Higher?

As a rule of thumb, refinance rates are often higher than when taking out a loan to purchase a home. But interest rates are dynamic and guided by market forces, so there may be instances where refi rates could briefly be lower than purchase loans.

Plus, even if a refinance’s quoted interest rate is equal to or higher than a comparable purchase loan, it’s entirely possible that the annual percentage rate (APR) may still be lower.

The APR is a more accurate measure of the actual cost of a loan, taking into account closing expenses and fees, which vary from mortgage to mortgage and lender to lender.

Here are today’s 15-year fixed rates for both purchases and refinances. Check for APR and rate differences.

Specific Refinance Rates Are Likely Lower

Refinance rates as a whole may trend higher than purchase loans. Still, there are specific refinance options that are likely to be lower than your average conventional loan.

Government-backed mortgages secured by the FHA, VA, and USDA will likely offer lower refi rates than conventional lenders. That’s because these loans are insured by the US government and thus pose a lesser risk to mortgage providers. Plus, these refinances offer streamline options that are faster and easier for lenders to complete.

Adjustable-rate mortgages may also start out lower than a standard fixed-rate, especially loans with shorter introductory periods. Here’s a look at today’s refinance rates for various loan types.

FHA Refinance Options

Today’s FHA Mortgage and Refinance Rates

FHA refinances are backed by the Federal Housing Administration and are designed to help borrowers with lower credit obtain affordable housing. Refinance loans are available with a score down to 500 if you have at least 10% equity in your home.

Borrowers with an existing FHA loan may be able to lower their interest rate with a low-doc FHA streamline refinance. Homeowners with other types of loans can refinance into the FHA program through the rate-and-term refinance option.

Similarly, all homeowners are eligible for the FHA cash-out and 203(k) rehab refinance programs.

Keep in mind that while FHA interest rates are usually lower than on conventional loans, borrowers are responsible for a 1.75% upfront mortgage insurance premium and annual premium costs ranging from 0.5% to 0.75% of the loan amount in most cases.

VA Refinance Options

Today’s VA Mortgage and Refinance Rates

Available to most veterans and active service members, VA refinances come with the backing of the US Department of Veterans Affairs. VA loans have among the lowest interest rates on the market for borrowers who qualify.

Like with the FHA streamline, current VA loan holders can apply for the interest rate reduction refinance loan (IRRRL) program to simplify the refinance process. This is also known as the VA streamline refinance.

All eligible borrowers can apply for a VA cash-out refinance, which, unlike other cash-out options, lets you withdraw up to 100% of your home’s equity. VA lenders also offer rehab refinance loans, which allow you to borrow funds based on the as-completed value of your property.

VA refinances come with a one-time funding fee ranging from 0.5% to 3.3%. Certain borrowers eligible for or receiving VA disability benefits may qualify for a funding fee waiver.

USDA Refinance Options

Today’s USDA Mortgage and Refinance Rates

USDA refinances are backed by the US Department of Agriculture and promote homeownership within rural communities. These mortgages are only available for current USDA borrowers and include both streamlined and non-streamlined options depending on your refinancing needs.

Unlike the other government-backed programs, the USDA offers no cash-out or rehab refinance loan options.

All USDA loans have a 1% upfront and a 0.35% annual guarantee fee, the USDA’s equivalent of monthly mortgage insurance.

Adjustable-Rate Refinances

Today’s Adjustable Mortgage and Refinance Rates

Unlike fixed-rate mortgages, which maintain a consistent interest rate and payment for the life of your loan, adjustable-rate mortgages (ARMs) have rates and payments that can change based on overall market conditions.

Depending on interest rates and market trends, it may be possible to find ARMs with a lower introductory rate than conventional fixed-rate refinances. In the current lending environment, this will most commonly be on 3/6 ARMs, which have a fixed rate for the first three years and then adjust every six months.

If you’re considering an adjustable-rate mortgage, be aware that if interest rates go up, so can your monthly payments, as is the case with this high-profile borrower. In cases of extreme rate shifts, the additional costs could be substantial. Conversely, if rates decrease in the future, it’s possible for your payments to drop.

Cash-Out Refinances Carry Higher Rates

Refinances can be broken down into two types: rate-and-term and cash-out.

Rate-and-term refinances are the standard refi option that lets you change the rate, term, and other conditions of your mortgage. Alternatively, cash-out refinances allow you to withdraw a portion of your home’s equity as a lump sum of cash along with changes to the terms.

While rate-and-term refinance rates may be comparable to (or occasionally lower than) purchase loans, cash-out refinances will almost always be higher.

Cash-out refinances are among the riskiest types of mortgages because they involve homeowners reducing their equity. In many cases, a cash-out refinance also raises monthly payments, upping the borrower’s risk profile.

Loan Amount Can Affect Your Rate

“Jumbo loans” are mortgages that are above Fannie Mae and Freddie Mac’s lending limit for the area. If you’re in jumbo territory, you might pay higher rates.

Your Financial Profile and Lending Needs Affect Refi Rates

Mortgage rates all move in sync with the larger financial markets. Whether a purchase loan or refinance, overall economic trends guide the direction and average of lender-offered rates.

But refinance rates take into account more than macro market conditions. Your financial profile and borrowing needs also significantly influence the rates you’re quoted.

Your Credit Score

Lenders use your credit score as the base for establishing your creditworthiness. Borrowers will need to have a score of at least 620 just to qualify for a conventional refinance. However, the best rates will go to borrowers with scores of 760 and above.

To demonstrate just how much your credit score can impact your interest rates, here’s what the national average looks like, broken down by credit score according to Optimal Blue Mortgage Market Indices at the time of writing.

Credit Score	Average Rate
>740	6.042%
720-739	6.147%
700-719	6.181%
680-699	6.280%
<680	6.428%

*average mortgage rates as per Optimal Blue as of 10/1/24. Examples only; may not be available.

Some of this rate spread comes from conventional borrowers with less than 20% equity needing private mortgage insurance, which varies based on your credit score. Through insurance provider MGIC, someone with a credit score of 630 would typically pay premiums that are more than three times higher than a borrower with an identical loan but a score of 760.

Your Income and Debt Level

Your income level and debt obligations also play a prominent role when lenders determine your interest rate. Having a higher income and fewer debts lowers your risk level compared to someone barely keeping their checking account in the green.

Conventional lenders generally want to see a debt-to-income (DTI) ratio of 45% or less, although this limit can vary by company. In some cases, well-qualified borrowers could be approved with a DTI of up to 50%.

However, these are maximum DTI limits and are likely to translate into higher interest rates for borrowers approaching them.

On the other hand, homeowners whose installment debts represent a small percentage of their income are considered less risky and can expect to receive lower rates. Experts generally recommend maintaining a DTI under 36% for the best deal on a refinance.

Your Built-Up Equity

The more equity you have in your home, the lower the interest rates you will qualify for. That’s because lenders also assess mortgage applications based on their loan-to-value (LTV) ratio.

For purchase loans, this is usually the property’s value minus the down payment. For example, a 5% down payment translates to a 95% LTV.

With refinances, the LTV is the new loan amount divided by the property’s current appraised value. For example, a homeowner doing a $180,000 refinance on a home valued at $300,000 would have a 60% LTV.

The more equity you have, the lower your LTV and the less risky your loan is to lenders. That’s because borrowers with a sizable amount of home equity are far less likely to walk away and stop making their payments than someone who just took out a zero-down mortgage.

Plus, if a borrower with a higher amount of equity defaulted on their loan and the lender was forced to foreclose, there’s a greater likelihood that they’ll be able to recoup their investment by selling off the property. 

Your Loan Length

Conventional loans come in a variety of terms ranging from ten to 30 years. Shorter terms can have rates substantially lower than a 30-year loan. In many cases, opting for a 15-year refinance could cut your interest costs by 1% or more compared to the standard term.

However, be aware that a shorter loan term equals larger monthly payments since you’ll repay your principal balance over fewer years. Depending on your finances, this could drive up your DTI and negate some of the interest savings from shortening your repayment term.

As per the Refi rate tracker, here’s what average conventional refinance rates look like for different loan lengths at the time of writing.

How we source rates and rate trends

How to Get Lower Refinance Rates

Although refinance rates are not the same as mortgage rates, it’s possible for you to qualify for a refi with lower interest than the average purchase loan.

Averages are just that – the average of all qualifying borrowers. If your loan profile is less risky than the typical applicant, you’ll likely qualify for more attractive rates. 

That means you should be:

• Proactive with your credit score, including digging through your credit report for erroneous entries that could be dragging you down
• Paying off or consolidating other debts to reduce your DTI
• Examining whether choosing a shorter-term loan might make sense for you

But simply working on your finances won’t be enough to secure the best possible rate. That’s because interest costs aren’t the same with all lenders, as they each have their own method for assessing risk. Fees and closing costs can vary from company to company as well.

Rather than settling on the first lender you talk to, you’ll likely receive the best rates by making a plan to apply with a minimum of three mortgage providers.

Equipped with multiple loan estimates, you can compare rates and closing costs and submit the most attractive offer to the other lenders so that they can compete among themselves for your business.

This can often result in a modest rate reduction or a closing cost savings of hundreds or even thousands of dollars.

Find Low Interest Rates for Your Refinance

Understanding how refinance rates work can help ensure you get the best deal possible on your new loan. By improving your finance profile, you can qualify for lower rates with cheaper monthly payments.

Get started here with Refi.com.