Refinance Loan Rate

When some people begin to explore refinance loan rates, it’s because they have an adjustable rate mortgage that is about to reset and they are concerned that the amount of their monthly payment could increase exponentially. Others look for more information about a refinance loan rate because they applied for a mortgage at a time when they had a lower credit score, and they are aware that there are savings to be had by refinancing.

To be clear, the savings from refinancing a mortgage do vary from one borrower to the next. For those borrowers whose original mortgages held an early repayment penalty clause, there may be additional fees even beyond closing costs of the new loan. When you’re considering refinancing, it’s a good idea to take a look at the lending contract of your current mortgage to determine whether or not taking out a new mortgage will really bring the savings that you are looking for with it.

Additionally, in order to know that you’re getting the best refinance loan rate, you will need to focus first on your own financial situation. What is your debt to income ratio? How much unsecured debt do you have – and is there a way in which you could pay it down quickly? Too much unsecured debt – as well as being over-extended financially – will weigh into a mortgage broker or lender’s decisions regarding your credit-worthiness.

Your credit score will also impact this decision. Those with a reported FICO score that is close to 800 who have the least unsecured debt will be the ones who receive the advertised low refinance loan rate. Individuals with credit scores at 600 and below often are provided interest rates that are 4% higher than the advertised rate.

To understand the impact of this on your costs, consider this: for every $100 you finance, 1% equals $1. If you are refinancing $150,000, consider the basics. If your refinance loan rate is 5.5%, you’ll be looking at $8,250 in costs related to interest. If the rate is 9.5%, the interest amount will be $14,250. While you won’t be responsible for paying that difference in one lump sum, it will impact all of the payments that you make throughout the term of the loan.

Debt reduction and a solid credit score will go a long way toward helping you refinance at the best rate possible, but there are additional steps that you can take to ensure that you are able to reduce your costs as much as possible.

Just as you would compare prices from different dealerships when you purchase a car, take the time to compare mortgages and refinance loan rates from a number of lenders and brokers in your area. Be sure to go in to your meetings with them with information about your current loan and with information based on recent financial news. Your local newspaper is likely to publish rates in their real estate or business section at least once each week, and most lenders provide their information on their websites.

The more information that you have available to you, the more prepared that you will be – and the better the position that you will be in to get a low refinance loan rate and the savings that go along with it.