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I am 26, a first-time homeowner and I bought a house last summer for $265k and as of today I got an exactly $180k principle remaining as of today I have a 30-year mortgage (my lender is WellsFargo) for a 3.75% interest rate. I have been told by my friends that if the mortgage rate falls below 0.5% then it makes sense to refinance my mortgage.

I went to WellsFargo's mortgage rate website, clicked on "Refinance Rates" and I see it is 3.75% but "Purchase Rates" is 3.25%. What is the difference? what am I missing? I believe the mortgage rate has gone down but it is stuck at 3.75%?

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Purchase Rate means exactly what is says. It is the loan rate you get if you are buying a house.

Refinance Rate is the rate you get if you have an existing loan and you want to refinance. Apparently Wells Fargo is not really interested in doing many refinances right now.

As of today (3-10-2020), I've seen ads for refi rates as low as 2.99% (in the US), so if you are really interested in doing a refi, you are not stuck with what Wells Fargo wants to charge. You can shop around.

When you get a refi, the new loan pays off the old loan. In general, it doesn't matter where the money comes from.

Some older loans have "prepayment penalties" where you get dinged if you refi too early. I don't think there are too many of those any more. Check your loan docs to make sure before you do a refi.

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  • Agree with not sticking with Wells Fargo (their business model has been dubious in the past). Big banks like that most likely won't offer the best rates. Small, local banks and especially credit unions will often have much more attractive terms, and better customer service!
    – Nosjack
    Commented Apr 10, 2020 at 12:59

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