What's the mortgage interest rate forecast for September 2024

10-Year Refinance Rates: What You Need to Know

If you have a 30-year home loan, refinancing to a 10-year mortgage allows you to pay off your loan decades earlier and score a lower interest rate. But these savings come at the expense of a considerably higher monthly payment, making it easy to outrun your budget.

Current 10-Year Refinance Rates

You may not see 10-year refinance rates advertised widely, but many mortgage lenders offer conventional, decade-long terms. Like other mortgage rates, 10-year refinance rates fluctuate based on factors such as the state of the economy and the overall credit market. The Federal Reserve maintained the federal funds rate after an unprecedented rate-hike cycle with 11 increases between March 2022 and November 2023 to fight post-pandemic inflation.

How 10-Year Refinance Rates Are Trending

After reaching their highest point in more than 20 years in late 2023, mortgage refinance rates have generally been trending downward.

"If the economy starts to cool and the Fed signals a shift toward lowering rates, we might see a bit of a dip in refinance rates. That would be great news for homeowners looking to lock in a lower rate."

— Mike Roberts, Utah-based mortgage broker

In mid-2024, Fannie Mae's Economic and Strategic Research Group forecasted that 30-year mortgage rates will average 6.4% in 2025. Following that estimate, we may see 15-year rates around 5.75% next year, as the 15-year rate has been 66 basis points lower on average than the 30-year rate over the past five years.

6 Tips for Scoring Competitive 10-Year Refinance Rates

1. 1

   Check your budget

   The payments on a 10-year term will be much higher than you're currently paying if you have a 30-year loan. Calculating your monthly dues — and double-checking affordability via your budget — is a wise first step.

2. 2

   Check your credit scores

   You'll likely need a 620 score to get a conventional loan, but a higher score can result in a lower interest rate. Pay all of your bills on time, make sure all your accounts are up to date and try to pay down debts before applying.

3. 3

   Figure your loan-to-value ratio

   For a refinance, you may need to have at least 20% equity in your home to get the best mortgage rates. So, if your home is worth $400,000, you'd need to have $80,000 in equity.

4. 4

   Shop around

   Compare interest rates, closing costs and other expenses. By comparing the annual percentage rate (APR) via preapprovals, you can compare all the refinance costs, not just the interest rate.

5. 5

   Consider discount points

   Some lenders allow you to purchase mortgage discount points in exchange for a lower interest rate. One point typically costs 1% of the loan amount and may lower the interest rate by around 0.25 percentage points.

6. 6

   Choose a loan

   Select the lender you want to work with and lock in your interest rate.

How Do Refinance Rates Work?

"It's a combination of factors — the overall economic climate, the Fed's policies, your credit score, your loan-to-value ratio and the demand for loans in the market. Typically, refinance rates are a bit lower than purchase rates, but the gap has been narrowing lately."

— Mike Roberts, Utah-based mortgage broker

If you have high credit scores, you'll be offered a lower rate than someone with fair credit scores. You can also lower your interest rate by having more home equity before refinancing. The state where the property is located can also affect the rate you pay, as can the loan program you choose.

Factors Affecting Individual 10-Year Refinance Rates

• Credit scores and history
• Loan program
• Rate type (fixed or adjustable)
• Borrowing amount
• Equity amount
• Loan term length
• Location

Loan Term Comparison: $300,000 Refinance

Pros and Cons of a 10-Year Fixed-Rate Refinance

Should You Refinance Your Home Loan to a 10-Year Term?

Refinancing to a 10-year term can save you many thousands of dollars compared to a longer term loan. In exchange, you must commit a lot of money every month to paying off your mortgage.

"If you can swing the higher monthly payment and you really want to be mortgage-free faster, it's definitely worth considering. The interest savings can really add up over time."

— Mike Roberts, Utah-based mortgage broker

"The danger I see is, people take a 10-year fixed and then struggle with the higher payment — it's about 70% more expensive on average than a 30-year fixed. If you think your mortgage payment is expensive now, try almost doubling it. It's not for everyone."

— Steve Hill, California-based mortgage broker

How to Apply for a 10-Year Mortgage Refinance

1. 1

   Do the math. Use a mortgage calculator to estimate your monthly payments. If you're not confident you can afford 120 straight months of that payment, consider keeping a longer loan term and paying extra toward the principal each month.

2. 2

   Check your eligibility. Make sure your credit scores are the best they can be and check your home equity. The more equity you have, the less risky you are to the lender.

3. 3

   Research lenders. Ten-year refinance loans aren't as common as 15- and 30-year terms. Get preapproved with at least one bank, credit union, and online lender each to compare rates.

4. 4

   Gather your documentation and apply. Lenders will require documentation to show proof of income, assets, and debts — recent pay stubs and bank statements, for example.

5. 5

   Get a home appraisal. Before the mortgage underwriting process can begin, your lender will need a new appraisal of your home to determine its current value.

6. 6

   Close on the loan. Your refinance loan will have a closing process and closing costs just like your original mortgage. You'll have a right of rescission until midnight of the third business day after the transaction to cancel the loan contract.

Originally published on CNN Underscored Money by Sandy John, Andrew Pentis, Katie Lowery.