Mortgage interest rates are at a historical low due to the ravage by the coronavirus, and this would be the best time to refinance a mortgage that has high interest rates or high payments. However, not every lender will offer you the best rates on the best terms. Besides, in the case you are opting to refinance mortgage for the first time, you have to be wary of all the situations around you. You would not want to commit yourself to an expensive loan in the long run. This is why the purpose of this blog is to give you some pointers I used to get the best refinance rates in the market.
My credit report played a very significant role in refinancing my loan. Unfortunately, credit report errors happen all the time, which can easily compromise my loan interest rate. Before going out searching for a lender, I assessed my credit report to ascertain if it had any errors. I rectified an error on the report, and I improved my credit score by sixty more points, which translated to a higher loan limit and a lower interest rate. This enabled me to have many more Mortgage Options (which saved me lots of money in the long term).
Before going out searching for a suitable financing option, I asked my credit card providers to increase my credit. I then used the least amount so that I have a lower utilization ratio, which guarantees me a lower interest once my credit report is run.
Unknown to most people, taking and paying off consumer credit is quite liberating as long as we keep making small purchases on our credit cards and repaying them regularly. Such small and timely repayments prove that borrowers can manage debts responsibly, which improves their credit score. Since I first learned about this tip, I only use my credit card to make small purchases. If I have a huge purchase, I will use cash or my debit card.
There is nothing free when it comes to money. We always have to pay for it in the end, one way or another. Therefore you should be cautious when a lender tells you that they offer no-cost loans. Every lender makes money by charging fees either upfront or in hidden costs. Some of the no-cost lenders roll these charges into the loan balance or the interest rate. A simple trick I use to avoid these lenders is to insist on paying the refinance closing costs in cash. This lowers my loan amount.
Longer loan terms tend to be more expensive and costlier than shorter ones because the borrower is forced to pay more interest over the years. This, in turn, leads to a higher loan repayment amount. I prefer to take shorter mortgage loans, like 15-year mortgages. After all, I save a lot of money because I pay it off in less time compared to a 30-year mortgage.
Cash-out refinance allows me to draw some of my home’s equity as part of a new loan. Impressive as it may sound for any potential borrower, I know that it also increases my loan to value ratio, translating to higher interest rates.
There is always a little bit of uncertainty regarding how mortgage rates will behave in the short term. Mortgage rates, just like the economy, are affected by political events like government announcements. To avoid these uncertainties when shopping for a mortgage refinance, I talked to my loan advisor, who told me to lock down my preferred interest rate once I had a good lender. This prevents the loan from rising for a certain period as we finalize the refinancing. This is the best trick to keeping refinance rates constant regardless of how turbulent the finance market becomes after finding a suitable refinance option.
Getting a good refinance lender is not easy, and the complicated financial jargon and the silver tongues of sales people do not make it any easier. That is why I came up with the above tips to help anyone looking to refinance their home. All the best.