If you’ve been trying to figure out how to get the best mortgage refinance rate before taking any bigger steps, this is your answer.
The Fed’s emergency rate cut in March had an impact on mortgages. By May, mortgage rates had fallen to record lows. Saving money by refinancing your mortgage at a lower interest rate can drastically change your monthly payments and even shorten your loan term.
But remember: the one-size-fits-all theory does not apply to refinancing rates. It is important to compare prices to find a lower price. Credible can help you compare mortgage lenders and save money on your monthly payments using their online tools. Validating personalized rates takes just three minutes and won’t affect your credit score.
What are the mortgage rates today?
The average rate on a 30-year fixed-rate mortgage fell to a record low of 2.86% on Sept. 10, down 0.07% from last week’s 2.93%, according to Freddie Mac.
The 15-year fixed-rate mortgage rate also hit a new low, falling to 2.37% from 2.43% over the same period.
5 Ways to Get the Lowest Mortgage Refinance Rate
Follow these five steps to secure the lowest mortgage rate available.
- Step 1: Compare rates and multiple lenders
- Step 2: Improve your credit score
- Step 3: Secure the lowest mortgage rate
- Step 4: Determine Your Home Equity Position
- Step 5: Change the loan term.
Step 1: Compare rates and multiple lenders
Finding the best mortgage refinance rate takes time. You need to compare interest rates from multiple lenders. Credible allows you to compare multiple lenders to ensure you meet your personal financial goals. Find out now how much you can save on your loan by refinancing.
Don’t be afraid to seek out multiple online mortgage refinancing offers and even use them as a bargaining chip, pitting lenders against each other for your business.
You can also use the refinancing calculator to see if the savings are worth the cost of refinancing.
Step 2: Improve your credit score
It’s even more important to know your credit score ahead of time (so you can check your credit score for free without penalty). Mike Dulla, president of United Home Loans, said, “Customers typically get the best rates on qualifying refinancings (loans of $510,400 or less) with a credit rating of 740 or higher.”
If you have a low score, it will be difficult to get a loan. But don’t worry, there are several ways to increase it quickly, including:
- Pay bills on time
- Request a higher credit limit
- keep credit card balances low
- be added as an authorized user
- Fix credit report errors
Step 3: Secure the lowest mortgage rate
Don’t risk losing out on low mortgage refinancing rates during these unpredictable times. Here are some of the best ways to get the cheapest loan rates:
- Browse: Use Credible’s free online tool to compare multiple loan offers and find out almost instantly which loan rate you’re eligible for.
- Build Credit: Pay credit cards on time, keep credit card balances low, and avoid new loan applications until you can trust your score.
- Act fast: After you’ve been approved for the loan, accept the offer so the interest rate doesn’t change.
Rate hold usually lasts about 30 days (though many lenders will be longer). This helps keep your interest rate the same from the time it takes when they give you an offer to when the loan is closed.
Step 4: Determine Your Home Equity Position
You can get the best loan rate for a 40% home equity position (60% loan-to-value ratio), Dulla says. He added that you can still get a high interest rate on a loan with a loan-to-value ratio of 95% or less, but the more equity you have in your home, the better.
“Sometimes it makes sense to pay off some of the loan balance if you raise interest rates. After all, the ultimate goal is to pay off these things,” he said.
Step 5: Change the loan term
If you’re considering refinancing, it’s a good idea to change the loan term to better suit your personal financial situation. According to Dura, there are a few things to consider when changing loan terms:
- Consider a 15-year fixed rate
- Don’t cash in on refinancing
- Watch out for points and other high settlement costs
- Ensure your employment is stable (lenders must verify employment a day or days before graduation)
- Do not hesitate
In general, refinancing now may be a good idea – just make sure you do your homework.
“Sometimes we see borrowers getting a little bit greedy and trying to time the bottom of the market,” Dura said. “Right now, if you can save $100 or more a month and pay the cap, that might make sense.”
Is a 15 Year Loan a Good Idea?
Interest rates on 15-year fixed-rate loans are currently in the mid-to-high 2 range, Dulla noted.
“You’re paying a lot less interest compared to a 30-year fixed-income investment,” he said. Not to mention the shorter loan terms that will allow you to pay off your existing mortgage faster. ”
Is cashing in on refinancing a good idea?
If you don’t need it, don’t put more than $2,000 in cash on your refinance. Cash-out refis – a special type of refinance loan where you can take out a new loan to pay off your current debt and borrow more money than you already owe on your home to get cash back – currently at Fannie Mae, Freddie Mac, not Dulla said, is popular with Mac and a few banks.
“You pay a higher rate for a payout refinance. If you get more than $2,000 in return at the close of the deal, Fannie and Freddie will consider a payout refinance,” he said.
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