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Best Mortgage Refinance Lenders | January 2023

Are you looking for a lower rate or a lower monthly payment on your mortgage? SuperMoney's list of best mortgage refinance rates can help you find the one that best suits your needs.

A mortgage refinance allows you to upgrade your current home loan for one with better terms and rates. By comparing rates and terms from multiple lenders, you could save thousands of dollars in interest over the life of the loan, pay off your mortgage sooner, or reduce your monthly payment. For example, lowering the interest rate of a $300K mortgage by 1% could save you over $55K over the life of the loan.

Here is our list of the best-rated mortgage refinance lenders.

Methodology

SuperMoney's list of the best mortgage refinance rates is based on the qualitative recommendations of our community members and the quantitative recommendations of our ranking algorithms. We analyzed more than 100 lenders and focused on lenders that provide competitive rates and terms.

What is a mortgage refinance?

The term "refinance" can be a little misleading because it gives the impression that you're changing the rates or terms of the existing mortgage as you would with a loan modification. However, a mortgage refinance is a brand new mortgage loan that pays off and replaces the old one.

How does mortgage refinancing work?

To refinance, you will have to take most of the steps you went through with the initial mortgage. This includes working through the paperwork and paying the closing costs and fees. The application process may be a little simpler and faster if you refinance with the same lender, but you still have to pay the closing fees.

What about no-closing cost refinances?

With a no-closing cost refinance you won't have to pay upfront closing costs. Unfortunately, that doesn't mean the fees are waived. Instead, they either get added to the loan or baked into it through higher interest rates.

What are the pros and cons of refinancing your mortgage?

Refinancing your mortgage can save you a lot of money, but it's not always a good idea. Here is a summary of the advantages and disadvantages you should consider when shopping for mortgage refinance rates.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider when refinancing your mortgage.

Pros
  • In some cases, it can lower your interest rate.
  • It may also lower your monthly payments.
  • Allows you to convert an adjustable-rate mortgage to a fixed-rate
  • It gives you the ability to remove a cosigner from the loan.
  • The option of tapping into your home's equity.
Cons
  • Extending your loan term could cost you more money.
  • You could be denied if your credit or income has dropped.
  • High fees and costs.
  • It can take years before a refinance pays for itself.

Which bank has the best refinance rates?

The answer to that question depends on several factors, such as your financial circumstances, credit profile, and the underwriting policies of the lender, to mention a few. The list of best-rated mortgage lenders included above provides an excellent starting point for finding the best deal for you. The best way to discover which bank offers the best rates and terms is to comparison shop several lenders when you are ready to refinance.

What are today's mortgage refinance rates?

It all depends on the type of mortgage you are applying for (fixed or variable rate), your credit profile, and the term of the mortgage refinance you are considering. It's important to understand that when you hear that the benchmark for a 30-year fixed-rate mortgage is, for example,  3.6% APR, or that the 15-year fixed refinance rate is 2.9% APR, these are all averages. You need to complete a loan application to get your rates. We recommend you apply with at least three lenders.

Another thing to consider is that the rates offered by lenders may be higher than expected based on the data provided by industry regulators or the news. There can be several reasons for this. For example, lenders sometimes respond to an overwhelming surge in demand by increasing rates to manage the demand.

Is it cheaper to refinance with your current lender?

It can be, but you will never know who gives you the best refinance rates until you apply. Once you know what rates you qualify for with other lenders, ask your current lender if they can beat (or at least match) your best offer. In some cases, your current lender may offer lower fees and rates because you have already built a relationship, and it can see your track record on payments.

When should you refinance?

When mortgage rates drop, homeowners usually wonder if they should refinance their mortgage. The short answer is yes, definitely, if it saves you money.

There are about 80.7 million mortgages accounts in the United States. 8 out of 10 people need a mortgage to buy a home, and 6 out of 10 homeowners still have a mortgage. So, it's no wonder that any change in the interest rates is big news for Americans.

Refinancing your mortgage usually comes with significant fees, so you have to make sure the investment is worth it. You may have heard of rules of thumb that say you should only refinance if you can lower your interest rate by 1 or 2 percent.

However, that is not always useful. A lot depends on the balance of your loan and your goals. A 0.5% drop can be significant if you have a large mortgage balance, or you plan to stay in your home for many years. On the other hand, a 2% drop in your rates may still cost you money (i.e., be a bad idea) if it means extending the term of your mortgage.

Am I eligible for a mortgage refinance if I have bad credit?

It is possible to refinance a mortgage even if you have bad credit, but that doesn't mean you should. A poor credit score will usually mean a high interest rate. So, you could end with a lousy interest rate that's not worth the cost of refinancing. Shared equity agreements are another option available to homeowners.

Shared equity agreements are much more flexible than refinancing a mortgage, requiring a credit score as low as 500. How? Well, instead of lending you money, shared equity investors give you cash for a slice of your home equity. This means easier qualification, no additional debt, and no monthly payments.

If your credit is not as good as you would like, consider applying for a shared equity agreement from the following investors (technically speaking they are not lenders since they are buying a share of your home's equity). Find out which one offers the best terms. It is free and won't hurt your credit.

How to calculate when it makes sense to refinance a mortgage

It is important to check whether a mortgage refinance will save you money when shopping for a new home loan. Here is how you do it.

First, calculate the cost of refinancing your mortgage. These include bank fees, title costs, third-part costs, and escrow charges, such as taxes and insurance.

The banks where you apply for a refinance should provide you with most of this information. Typically, it will cost between 2% and 4% of the loan amount. So you would expect something between $6K and $12K for a $300K mortgage refinance.

Does your current mortgage have a prepayment penalty? If so, don't forget to include this fee in your calculation. In some cases, you can avoid the penalty if you refinance with the same lender.

Second, calculate how much you will save each month with the new mortgage.

For example, if you have a $300K mortgage with a 30-year term and a 5% interest rate, you could save $178 a month with a 4% interest rate.

Third, divide the closing costs by the monthly savings. This will give you the number of months it will take to cover the cost of refinancing.

Let's say your closing costs are $8,000 and your monthly savings are $178. You would start saving money after 45 months (8000 : 178), or three years and nine months.

Finally, ask yourself how long you plan to stay in your home before you sell it. This will give you a good idea of your total savings and whether it is worth your time to refinance.

In this example, you could save up to $56K over the 30-year term. However, the refinance would only save you $534 if you sell after 4 years. Of course, paying off a mortgage early can save you a ton of money in interest (assuming there isn't a prepayment penalty), but that's independent of the refinance.

If you have a mortgage, find out how much you can save by applying with three or more lenders. Compare the mortgage rates of the lenders above and calculate how much you could save with a refinance.

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SuperMoney
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