- It pays to shop to find the best refinance rates.
- Take a four-question test to learn what rate you will find.
- The lowest rate may not be the best loan, compare the lifetime cost of any new loan.
How to Find the Best Mortgage Refinance Rates
The terms mortgage rates and refinance rates have been crowded out of the news over the last three years because of mortgage modifications, a high foreclosure rate and the shortcuts mortgage lenders took when foreclosing on properties.
The good news in the mortgage field is the rock-bottom rates available to home buyers and existing homeowners who want to refinance. Homeowners can take advantage of low rates to lower their payments or to consolidate higher interest rate debt in to a lower rate mortgage.
Even with market rates hovering near historic lows, each homeowner must determine whether a mortgage refinance makes economic sense. At what rate is a refinance worthwhile?
Let us start with a basic question: How are mortgage rates set for different customers?
Lenders determine the rate for each borrower based on credit history, value of the home, balance of existing loans, income, and total of other assets. In a nutshell, they are trying to determine the likelihood the borrower will repay the loan. The more likely the borrower can and will pay, the lower the rate. The less likely, the higher the rate. Each lender uses different underwriting standards. Lender A may see a potential borrower as a greater risk than Lender B. Therefore, it pays to shop, especially if a lender quotes you a rate higher than the published rate.
Qualifying for Low Rates: A Quick Self-Test
How do you know if you qualify for a low rate? Start by answering these four questions:
- Do you have a consistent history of paying all of your bills on time?
- Do you have the monthly income to make your monthly payments easily?
- Do you have at 10% or more equity in your home? Or, is the total balance of any existing loans on your property equal to less than 90% of your property value?
- Do you have other assets, i.e., stocks, savings accounts, 401(k) balances, etc.?
If you answered Yes to all four questions, you are a good candidate to receive the benefit of some of the lower market rates today. If you answered No to one question, it is still worth talking to a mortgage professional or using some of the tools on Bills.com to determine the rate that you qualify for. However, you may not qualify for the absolute best rate. If you answered No to two or more questions, finding very low refinance rates will be difficult. Take advantage of the other tools on Bills.com to better understand how you can improve your situation and qualify for the lowest rates in the future.
The Bills.com Refinance Calculator helps you to decide quickly whether a refinance makes sense for your specific situation. Or if you prefer to talk to some lenders and negotiate the best terms with a few. Get a Bills.com Quick Quote and get matched with some of the best lenders in the country based on your unique situation and needs.
The Best Rate May Not be the Best Deal
The interest rate of your loan should never be the sole consideration for your refinance decision. In some situations, you may not want the offer with the lowest rate. If, for example the low rate is dependent on taking a three-year adjustable rate loan, when you know that you will need to keep the loan for at least a year or two into the adjustment period. In that case, you should consider a five-year or ten-year ARM refinance or a fixed-rate mortgage. Or, if you need to get cash from the refinance to pay bills or use the cash for other purposes, then you might want to choose a mortgage with a slightly higher rate to get the loan that makes the most sense for your situation.