5 Steps You Can Take to Help Lower Your Refinancing Rate

5 Steps You Can Take to Help Lower Your Refinancing Rate

Refinancing can be a great way to lower the rate on your mortgage. If you originally entered into a loan with a high-interest rate compared to the present day or if you had a flexible rate which has gone up more than expected, refinancing can lower your monthly payments. If you need cash, refinancing can also be a good way to pay off an existing mortgage while getting the cash you need for either consolidation of other debts, or to use in other ways.  Whatever your reasons for refinancing, it is essential to know what is needed to get the best rate possible for your situation.

Related Blog: 5 Reasons to Avoid Traditional Bank Loans When Purchasing a Home

1. Think Long Term

The first and most important thing you need to do is ask yourself: why are you refinancing now? If it's in order to get a lower rate, then keep in mind that monthly payments do not always tell the whole story. After all, a slightly higher rate for a 15-year mortgage may be a better deal than a smaller rate for a 30-year mortgage, if you can afford it. If you need to get at the equity in your house, seriously ask yourself what value you are going to get right now and ten years from now from the investments you are planning to make. These kinds of choices can help you get the lowest possible rate on the best possible terms for your life goals.

2. Compare Rates

Always compare rates from different lenders. If possible, ask several lenders to give you loan estimates given your current situation and the value of your home. Allow each of these lenders to show you different options, so you can compare different loan types. As an important component, especially if financing for a lower rate, check ahead and see if rates are going up or down. Paying attention to the trending rates at the time you’re considering refinancing is important in making sure that you’re refinancing at a time when rates are generally low.

3. Compare Closing Costs

In addition to looking at rates, you should look at how much it will cost you to refinance at the very start. Paying slightly more in the beginning may - or may not - save you a good deal in the long run. For example, say you want to refinance your home now to get a 3.35 rate down from a 5.35 rate. You still have $50,000 left to pay off on your home including interest accrued. You will therefore be refinancing for $50,000 over a x year period, plus interest over the life of this new loan. Now, put that amount of money to the side. Lenders may offer lower rates in exchange for fees like an origination fee, a processing fee, and thorough home inspections. Make sure to take all of your costs and opportunities into account.

4. Improve Your Credit Score

This one may go without saying, but we cannot emphasize this enough. Together with your current employment prospects, a good credit score is essential to getting the best rate on a mortgage refinance. If you have any blemishes on your credit report, do everything in your power to clean those up. If you have any credit cards with a high balance, or any late payments on your bills, do everything you can do resolve these issues before you apply for a refinance mortgage. Before taking any actions towards improving your credit score, however, make sure you talk to a mortgage expert that can guide you in this process. Actions that you think are helping can sometimes have an adverse effect on your score.

Refinancing your house simply because you desperately need more money and you are in financial trouble will almost always wind up with bad terms - but we also know that doesn't mean you have any choice about it. If you are going through a personal emergency of some kind, most communities have free or low-cost financial advisors who can help you make sound choices in a trying time. We all have problems sometimes. The last thing you want to do is make your future harder by making the wrong choices in a time of crisis.

5. Take Time to Talk to Lenders

Last but not least, don't be afraid to talk honestly with your potential lending partners. After all, lenders are people too. Recent history has shown more than ever before that a home loan is more than just numbers on a screen. Explain your situation, explain what you're looking to get out of refinancing, and ask for honest advice. In this modern age of streaming content and numbers on screens, it's easy to be overwhelmed. A responsible lender can help you make sense of your options and point you in the direction of alternatives that will work best for you, including the best rates taking your occupation and lifestyle into account.

Would you like more information about refinancing? Want a friendly, personal touch that can walk you through this journey? If so, contact us today.

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