How To Get The Lowest Refinance Mortgage Rates

If you are considering refinancing your home to get a lower mortgage interest rate, there are several steps you should take to qualify for the lowest mortgage refinance rates possible.

Smart shoppers get the lowest mortgage refinance rates

One of the advantages of searching for refinancing information online is that you have access to hundreds of mortgage lenders. Shopping for a home refinance is no different than shopping for any other kind of bargain, except that the stakes (and the amount of money involved) are higher. Never take the first offer you are given. As the song says, shop around.

Compare interest rates, points and fees from a number of different lenders, to make sure that you are getting the best possible deal. While many homeowners compare mortgage loans purely on the interest rate, be sure you also check to see the points you may need to pay in order to qualify for the lowest rate. Lender fees and closing costs vary dramatically, so take this into consideration when you compare loans.

Run the numbers before refinancing

When deciding to refinance, it's important to calculate the break-even point, the time it will take for your savings each month to pay for the costs associated with your new loan. Refinancing a home usually costs three to six percent of the loan amount. A lender will give you a Good Faith Estimate so you get an accurate idea of what a home refinance will cost.

Calculate the amount per month that you will save with a refinance and then compare your savings with your costs. For example, if you will save $100 each month and the refinance costs $1,200, you will recoup your costs in one year. After that, your savings will accumulate for the rest of the loan.

Once you have determined that the benefits of refinancing outweigh the costs, you should try to negotiate even better terms. If you are happy with your current mortgage lender, ask them if they will be willing to match the best offer that you have been given.

If you think the fees you are being charged are too high or you have been offered a home loan with lower fees, it never hurts to ask the lender if they will waive some of the fees to keep your business. The worst they can do is say is no.

Credit ratings and refinancing

The two most important elements to getting a home refinance approved are the equity you have in your home and your credit score. Lenders today place more emphasis than in the past on the credit scores of borrowers and will adjust the mortgage refinance rate according to the score. Borrowers with a credit score of 720 or 740 and higher will usually qualify for the lowest mortgage interest rates.

Before you apply for a mortgage refinance you should request your free annual credit report and review your credit. Look for mistakes and follow the instructions to request a correction. Improving your credit score can take time, so if you intend to apply for a home refinance, make sure you give yourself time to build up your credit. On MyFICO.com you will find recommendations that can help you raise your score.

The most effective ways to improve your credit score are paying all your bills on time, especially your mortgage, and reducing consumer debt such as credit cards and personal loans. Keeping your use of credit cards below 30 percent of your credit limit is recommended.

The bottom line

Positioning yourself with good credit and payment history and shopping around for a reputable lender who will qualify you for the best mortgage rates are the best ways to make sure your refinancing experience is a financial success.