10 Refinance Home Mortgage Rate Tips
With plummeting interest rates nowadays, it may seem like a good idea to consider applying for a refinance home mortgage rate loan that is lower than your current mortgage rate. However, making a decision to refinance your mortgage based exclusively on lower refinance home mortgage rate does not guarantee you savings in the long run.
This article will provide top 10 foolproof refinance home mortgage rate tips and what important aspects to take into account when making this important financial decision.
1. Know your current credit score to optimize your chances of getting the lowest possible refinance home mortgage rate or even mortgage refinance no closing costs under certain conditions. If your existing credit score is under 620, chances are you will not be able to get a significant rate reduction to make heavy refinance closing costs worthy in the long run.
2. Consider how long you are planning on staying in your current home since it will help you decide whether you should refinance in the first place. Check out free online mortgage refinance calculator to calculate a minimum number of years you should stay in your home to offset refinance closing costs against reduced rate savings and make it a financially worthy decision for your family. If you are not planning on staying in your house for a long time, you are very unlikely to gain any financial savings over such short period of time.
3. Shop around and check out at least three lenders of various categories to get the best refinance home mortgage rate. Mortgage lenders come in three major categories, namely, mortgage brokers, direct lenders and mortgage bankers. The main difference among these categories is whether you will be borrowing directly from a source or through a middle man. All three categories possess their unique set of pros and cons and you should definitely check out one out of each group to get the optimal refinance home mortgage rate.
4. Understanding all inclusive loan closing costs is an important part of getting your refinance home mortgage rate reduction. Mortgage lenders incur a wide variety of fees like loan origination, processing, credit check, inspection and many more that you will be responsible for paying in the end at the closing.
5. Avoid hidden fees that could be masterfully camouflaged into fine print and may not appear obvious at first. Even loan deals that might sound great at first like “mortgage refinance no closing costs” might come at generally higher rates that in fact wrap all the average closing costs that lenders incur.
6. A lower refinance home mortgage rate does not guarantee you bottom line savings since a lot of factors are influencing your refinance loan calculations including loan term and loan balance. Always compare annual loan interest cost of your old loan with your new one to figure out if in fact you will be getting much desired savings.
7. Paying points or prepaid interest may be a great way to get a lower refinance home mortgage rate in the long run if you are planning on staying in your home for a while.
8. In the pre-crisis economy the general rule of thumb for refinance home mortgage rate was to get at least a 2% rate reduction to make substantial closing costs worthy your monthly savings in the long run. Nowadays, it might not always be true and one should look at each individual case separately.
9. Avoid refinancing too often even if refinance mortgage rates seem to be attractively low since you might be running into a problem of continuously extending your loan period and paying more money in the end.
10. Jumbo mortgage rates necessary to purchase higher priced housing generally tend to run higher compared to regular home loans. The best way to avoid paying excessively high jumbo mortgage rates is to take out two loans that will place your refinance home mortgage rate below the jumbo rates and save you thousands of dollars over a period of time.