6 ways to improve your odds of getting a low mortgage refinance rate
Mortgage rates are hovering near record lows and the Federal Reserve has pledged to keep interest rates near zero until 2023, providing homeowners with ample time to lock in the best mortgage refi rates possible. Before speaking with banks or lenders, it’s wise to take the steps necessary to position yourself as an ideal candidate for the lowest mortgage refinancing rates.
6 ways to get the lowest rate when refinancing
Refinancing your mortgage may be simple, but getting the best mortgage refinance rates requires a little patience, effort, and strategy. Use these six steps as your checklist to organize your finances and secure a low mortgage refinance rate.
- Make extra payments to increase your equity
- Lower your other monthly bills
- Consolidate your debt
- Research multiple lenders
- Improve your credit score and monitor your credit report
- Increase your income
1. Make extra payments to increase your equity
No matter the size or structure of a mortgage, making consistent monthly payments on time is vital. However, some homeowners don’t realize that they can make additional payments each month to lower the principal. Any extra payments will lower the loan, but making additional mortgage payments on a bi-weekly schedule can substantially shorten the amount of interest paid on the loan during its lifespan.
As you pay off more of your mortgage, you’ll increase the equity in the home. When the time comes to refinance, homeowners who have at least 20% equity may be eligible to remove the private mortgage insurance on the loan, thus lowering the overall interest rate.
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2. Lower your other monthly bills
All homeowners should have a clear picture of their finances prior to refinancing their mortgages, which includes an estimation of average monthly expenses. Lowering your monthly bills helps in two ways: it allows you to increase your savings and it can lower your debt-to-income ratio.
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3. Consolidate your debt
Because lenders will consider your debt-to-credit ratio when offering lower mortgage refinance rates, it’s helpful to pay down debt as soon as possible. One way to streamline this goal is by consolidating your debt.
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4. Research multiple lenders
With interest rates at dramatically low levels, borrowers will have no trouble finding low mortgage refi rates from virtually all lenders. However, these rates will vary slightly from lender to lender, so it’s best that you research multiple lenders to determine who can offer you the lowest rate possible.
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5. Improve your credit score and monitor your credit report
Although the Federal Reserve sets interest rate levels, individual lenders will offer borrowers rates that include additional fees. The rate that they offer will be heavily influenced by your credit score. You can improve your credit score by not only paying off debt but also by removing any errors from your credit report. You should also regularly monitor your credit score and report to ensure its accuracy.
6. Increase your income
Money may not grow on trees, but increasing your income quickly isn’t an impossible task. Start by investigating opportunities for pay raises or overtime shifts at your current job. If you have a skill you can monetize in your free time, consider seeking out freelance work or side-jobs to generate additional income. The increase in opportunities for remote working offers unique ways to earn a supplemental income from home.