Hardship Recovery

How To Get The Lowest Interest Rate When Refinancing Your Home

Has the news of super-low interest rates tempted you to refinance your home? Keep reading to see what you can do to get the cheapest rate on your mortgage.

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Quick Tips to Boost Your Credit Score

The higher your credit score, the more likely you’ll get a lower interest rate on your new mortgage.

Here are some of the simplest ways you can raise your score as you look to jump into this perfect refinancing opportunity:

1. See where you stand.

It’ll be hard to improve your credit blindly, which is why you should first get your free annual credit report so you can see where you currently stand.

If your score seems way too low at the moment to get approved, you may want to hold off just a bit on refinancing until it improves. And you can improve it by making some of the following moves.

2. Check for errors.

Credit report errors pop up much more often than you’d think, which is why you should scan your report to see if there are any that need to be removed.

The quicker you can remove the errors, the faster you can see your score increase. This makes a refinance application’s approval and getting a lower interest rate more likely.

3. Use less of your available credit.

Are all of your credit cards maxed out? If so, having such a high credit utilization ratio can keep your score lower than you’d like. And this can keep you from getting that low interest rate you desire.

Do your best to pay down debt so you can lower your utilization ratio. If this isn’t really an option, you can also try to increase your available credit by contacting your credit card companies.

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4. Make small credit purchases and pay on time.

You want to show that you’re good at managing your debt. Doing so can increase your score and lead to a more favorable refinance loan.

How can you show you’re a good debt manager? By making small credit purchases and paying them off every month.

Other Tips For Getting The Best Refinance Rates

Now that you know what can help you increase your credit score, let’s look at some other methods for getting low refi rates.

Compare as Many Lenders as Possible

The mortgage marketplace is competitive. What does this mean for you? That lenders are going to try to outdo the competition in order to secure you as a customer.

Shop around with as many lenders as you can. On average, Freddie Mac says you can save $3,000 during the life of a mortgage by shopping among five lenders. If you shop just two, those savings drop to $1,500 over the life of the loan.

What should you focus on when comparison shopping for the best refinance loan? Keep an eye on the annual percentage rate (APR). Instead of just showcasing the interest rate you’ll pay, it also includes any extra fees.

Opt for a Shorter Term

If you have some wiggle room in your budget, aim for a mortgage with fewer years on the loan. Shorter loans can lead to lower interest rates and save you a lot of money over time.

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