How to get the best mortgage refinance rate, according to experts

Many homeowners face the dual challenges of high daily costs and high interest rates. Mortgage payments can be difficult to make along with simple purchases like gas, groceries, and tuition. However, taking out new loans to cover these additional costs can be relatively expensive.

Still, there are times when it makes sense for homeowners Refinance their mortgage To improve their financial condition. In this case, getting the best rate possible is essential.

Check today’s mortgage refinance rates here.

When mortgage refinancing costs

Refinancing your mortgage can be a smart decision for the following purposes.

Get lower interest rates

If you have a mortgage at a rate higher than the current refinance rate, Refinance now You can get a better rate — especially if you had a situation like a low credit score that only qualified for a higher interest rate, but your credit score has since improved.

Refinancing can also help You will get a lower interest rate on your total loan.

For example, a large reconstruction project is financed by Home Equity Line of Credit (HELOC) A fixed-rate mortgage can potentially carry a higher interest rate than a refinance, which can make sense if “the amount of the project is much higher than the current outstanding amount of the mortgage loan,” says Jerry Kors, president, Merchants Mortgage Merchants Bank of Indiana.

Similarly, Refinancing can help Covers existing obligations, such as “paying off high-interest debt like credit cards,” says Ben Miller, CEO of SimpleNexus, a mortgage software provider. “As hyperinflation increases the cost of living significantly, many people turn to credit cards to maintain their standard of living.”

Mortgage insurance drops

In some cases, refinancing may enable you to opt out Private Mortgage Insurance (PMI).

Many homeowners may request that their lenders waive PMI when they reach 20% equity, but refinancing with other types of loans and/or lenders can help you waive PMI even if you’re below that mark. Still, you should compare total costs, as a lender may waive PMI in exchange for a higher interest rate.

For those with lender-provided mortgage insurance (LPMI), refinancing once you hit 20% equity can remove this coverage to save you money overall.

To change mortgage type

Another one Reasons for refinancing Your mortgage type is changing.

Considering that rates may rise in the near term, “It may be beneficial for borrowers to switch from an adjustable-rate mortgage to a fixed-rate mortgage. This will provide them with the certainty of consistent repayments,” says Josip Rupena, founder and CEO of Milo, an online mortgage provider. .

Or, refinancing to a shorter loan term, such as switching from a 30-year to a 15-year mortgage, may make sense. “This will result in a higher monthly payment but will save money in the long run due to overall lower interest,” says Rupena

Check out current mortgage refinancing rates now to see if this option is right for you

How to get the best mortgage refinance rate

If you’re interested in a mortgage refinance loan, you can better position yourself to get the best interest rate by taking the following steps.

Improve your credit score

In general, higher Credit score Eligible for lower interest rates.

“A solid credit score can make a big difference,” says Rupena

Paying your bills on time, keeping your credit card balances low, and regularly checking your credit report — such as spotting errors that hurt your score — can help. Increase your scoreRupena adds.

Pay off the debt

Not only can managing your debt help your credit score, but it can directly contribute to qualifying for a better refinancing rate as lenders look at your debt-to-income ratio (DTI).

“A lower DTI ratio is more attractive to lenders. You can achieve this by reducing your debt or increasing your income,” says Rupena.

Build equity and/or savings

Increasing your home equity and/or savings means getting more favorable terms from mortgage refinance lenders. Also, borrowing less can mean paying less interest overall.

In some cases, achieving these increases is a matter of spending time. But you might be able to Increase in equity with Cost-effective home improvements.

“If you have a significant amount of equity in your home and can put at least 20% of the loan amount down, you will likely see a lower interest rate for refinancing,” says Dan Dadoun, executive vice president of sales at Silverton Mortgage.

“But it’s important to automatically assume you don’t have enough equity or the rate isn’t too high. Make sure you’re talking to a licensed mortgage loan originator who can accurately assess your financial situation and provide you with the best options,” Dadoun adds.

Find your perfect mortgage refinance loan — start here today!

Shop around for lenders

Finally, take the time to shop around Mortgage refinance providers Can help you get a better deal.

“My top tip for securing the best mortgage refinance rate is to compare lenders for the best options available. But, make sure you’re comparing the same products and terms,” ​​says Kors.

“Items to compare would be term, rate, points — if any — and fees. There are occasions where a lower-than-usual rate seems possible only with additional fees and points,” Coors adds.

Bottom line

By following these tips above, you can increase your chances of getting a better refinance rate and overall loan terms.

But remember, not everyone benefits from refinancing. In addition to the relatively high interest rates at the moment, there are additional expenses Closing costs Refinancing can make refinancing worthless for some homeowners.

So, take stock of your financial situation and compare different loan options to determine if interest rates are coming down or if it’s better to wait to find a better one. Refinance deal now.

“Realistically, consumers aren’t looking to refinance right away unless they have to. In any market, securing the best available mortgage refinance rate depends on factors such as loan length — a shorter loan term usually comes with a lower rate — and the borrower’s financial situation,” says Miller. .