Strengthening your credit score, getting rid of some debts, spending time shopping around, locking in your rate at the right time, and refinancing your loan to a shorter term are some ways to get the best refinance rates on your new home loan.
Refinance Rates Overview
When refinancing a home, homeowners are always on the lookout for the best refinance rates possible. The refinance rate you get is not left up to chance — there are many ways in which you can help influence the refinance deal that you get for your home.
Tips Get the Best Refinance Rates
1. Get Rid of Some Debts
Along with your credit score, lenders also take into consideration how much of your monthly income goes towards debts and payments, such as student loans and auto loans. This is referred to as your debt-to-income ratio. The lower your debt-to-income ratio, the greater chance you have of not only being approved for a loan, but of getting a lower interest rate. Before you submit a loan application, pay off as much of your debts as you can — including your current mortgage.
2. Don’t Skimp on Shopping Around
One of the most effective ways to score low refinance rates is comparing various lenders’ offerings. The refinance market is inundated with lenders who want to score your business, and there are some competitive rates out there. After you think you’ve found a good deal, search some more. Make a list of your top options, and compare the advantages and disadvantages of borrowing from each. Compare APR, interest, monthly payments, and all other fees and rates associated with each lender’s quote. It’s okay to ask potential lenders questions, even if you haven’t yet made up your mind.
3. Strengthen your Credit Score
Probably one of the most important things to do. The higher your credit score, the more likely you are to be offered a lower interest rate from a lender. In fact, credit score is one of the most important elements that lenders review when you submit an application for a refinance loan. If you know that you plan to apply for a mortgage refinance soon, spend the time between now and then ensuring that you pay off your credit cards and other bills on time to boost your score. Obtain a copy of your credit report, and make sure that all the information on it is accurate. If you find inconsistencies, ensure that you have them corrected before you apply for the new mortgage.
4. Lock in your Rate at the Right Time
Refinance rates are volatile and ever-changing, and if you want to secure the best rate, you must lock in the deal with your lender at just the right time. Choose a lender who you trust and can coordinate with to determine the best time to secure a deal. An experienced loan agent will know when rates are at their lowest, and one who has your interest at heart will be glad to alert you when the time is right.
5. Refinance to a Shorter Term
Lenders typically offer lower refinance rates over shorter periods because there is less risk to them and there are higher monthly payments. Therefore, one of the best ways to guarantee a better refinance rate is opting for a shorter loan term. You’ll face higher monthly payments, but interest rates will be lower, so the overall cost of your loan could decrease dramatically! In 2017, Zillow reported that national refinance rates for 30-year fixed-rate mortgages stood at 4.03%, while rates for fixed-rate 15-year mortgages stood at 3.21%. If you have a short amount of time left on your original mortgage, like ten years left in a 30-year term, refinancing to a new ten-year mortgage could significantly reduce the amount you have left to pay.
Get the Best Refinance Rates
Now that you understand what you can do to access the best refinance rates, next step will be to research and compare lenders who can offer the best product for your needs.