Interest rates have been falling over the past year, which has caused many homeowners to look for refinance options. Falling interest rates can save homeowners quite a bit of money on their monthly payments and lower the overall cost of their loan. In most cases, If you can get at least 1% or more off your mortgage loan, it could be worth going down the refinance path. Several things can help you get the best mortgage refinancing loan rate possible. Consider the following:
Work on Improving Your Credit Score
Your credit score plays a vital role in the interest rate that lenders will offer you on a mortgage refinance. Get a copy of your credit report from one of the three credit reporting bureaus and make sure that all of your information is correct.
Bills paid on time, the length of your credit history, amounts that you owe lenders, and types of credit used are all factors that affect credit scores. Try to stay under 30% of your available credit on credit cards, or work on paying them down faster to clear up your available credit. It may take a while to see an improvement, but it will be worth it in the end.
Consider Buying Points
Buying points is a way that you can lower the interest rate on your loan. You are paying the lender upfront in return for a lower interest rate on the loan. In most cases, Each point is equal to 1% of the loan amount. This is an area where the borrower and lender can negotiate terms on a loan. However, you should only consider this option if you have the cash reserves available and plan to be in the home for a long enough time to benefit from a lower rate.
Take on a Loan Term That Fits Your Needs
Taking on a shorter loan term can help in getting a much lower interest rate. It means that your monthly payments will increase, which can be a problem if you are unable to afford them or experience a financial crisis. A longer-term will help keep your monthly payments low, and it will end up costing you more over time because of interest.
Choose a Fixed Interest Rate
An adjustable-rate refinance mortgage might offer you a lower rate for the first several years of the new loan. After that, they will adjust to market conditions that may or may not be in your favor. A fixed interest rate will offer you the stability of the same monthly payment.
Know What the Loan Amount Will Do to Your Mortgage
As you borrow money, monthly payments will increase accordingly. It could cause payments to be hundreds of dollars higher by adding to your loan amount. Use an online refinance calculator to see how different decisions will affect your cost and to understand how much you will be paying per month.
Shop Around for Lenders
It is not necessary to go with the same lender who currently holds your original mortgage. Research multiple lenders and get quotes to find out how much money you qualify for with a new loan. Shopping around can help you save thousands of dollars. Be sure to pay attention to their advertised rates, which may increase discount points. The interest rate may seem much lower than other lenders. However, you have to pay for those points.
You will also want to be looking at the annual percentage rate (APR) of the loan. This includes the interest rate and all the closing costs of the loan. Some closing costs can be negotiated with the lender. A lender may reduce a closing cost or offer a credit somewhere else to lower your overall costs of refinancing your mortgage.
Get started on refinancing your home, by giving us a call at 855-465-0753 today!
*NASB does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. North American Savings Bank is not a credit counseling agency, credit repair organization, debt settlement company or similar service. North American Savings Bank does not make any guarantee or other promise as to the results obtained. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
