Refinance Mortgage Rates – What You Should Know Before Refinancing Your Mortgage
Refinancing is an option for homeowners who want to reduce their monthly mortgage payments, pay off their loan faster, access home equity or consolidate debt. It can save thousands of dollars in interest over the life of your loan; however, it’s essential that other factors be taken into consideration before you decide whether or not to refinance.
Requirements to Qualify for a Refinance
Most lenders require borrowers to have excellent credit scores and low debt-to-income ratios (DTIs) in order to be approved for a refinance. Furthermore, lenders want to guarantee that borrowers can afford the new mortgage payment, including any fees or closing costs.
Comparing offers from different lenders is the best approach when looking for one. Bankrate’s refinance rate table, which aggregates rates from various lenders, can help you get an idea of what might be available to you.
When looking to refinance your mortgage, the ideal time is when market rates are lower than your existing one. If you’re looking to lower your monthly payment through refinancing, take advantage of a rate reduction of at least 1% below what you currently have on the loan.
Before considering refinancing, you should carefully consider how long you plan to remain in your home. If you anticipate selling within the next few years, the expense of refinancing may not be justified.
If you’re refinancing for another purpose, such as to access your home equity, the ideal time to do it is when you have enough money saved up. This is especially true if you have been saving up for an emergency or other major financial event like a medical procedure or the birth of a child.
Refinance loans come in two varieties: “rate and term” refinance and “cash out” refinance. With a rate and term refinance, you take out a new loan to pay off your current mortgage and repay it over time (usually 15 or 30 years). Conversely, with cash out refinancing, you borrow enough money without needing to put any down on the new loan; therefore, there will be no cost involved for you when taking out this type of loan.
Refinance Rates Are Altering Daily
Refinance rates fluctuate on a weekly basis, so it’s wise to do your due diligence before applying for a refinance. A refinance rate table can help you compare rates across loan terms such as 30 year fixed or 15-year fixed options.
Finding the Best Refinance Rates
You can get the best refinance rates by improving your credit score and paying off bills on time. Lenders typically offer the lowest rates to borrowers with credit scores of 620 or higher who demonstrate they’re capable of making timely payments on their debts.
It’s wise to review your credit report periodically in order to confirm its accuracy. Furthermore, calculate your debt-to-income ratio (DTI) and pay off all credit cards, student loans, auto loans and other debt on time.
