The lower your interest rate on your refinance mortgage, the
more money you will save. But not all refinance loans are
created equal. To get the lowest interest rates, follow these
three tips when applying for you refinancing.
1. Refinance Your Entire Mortgage
Refinancing your entire mortgage will help you to qualify for
the lowest rates. Having split mortgages or a home equity line
of credit elevates your risk level and rates.
However, if you have a really good rate on one mortgage, then
you may not want to combine those mortgages. Take the time to
request quotes for both loan situations. Within minutes, you can
get an answer from lenders and know which is your best option.
2. Don't Cash Out Your Equity
Cashing out part or all of your home's equity will also raise
your refinance rates. So keep that equity in place while you
apply for refinancing. It acts much like a down payment did for
your original home loan. The larger your equity, the better your
rates.
If you want to tap into your equity, consider applying for a
separate loan after you refinance, like a home equity line of
credit. That way you won't be paying a higher rate on your
entire principal.
3. Lower Your Rate With Points
As with your first mortgage, you can lower your rates by buying
points. This is a bit risky in that you have to keep your loan
for seven years usually to recoup the cost. To make sure this is
your best choice, compare lending offers. Calculate the cost of
points and your potential savings.
In addition to these tips, comparison shopping will also help
you get a lower interest rate. Each lender looks at refinancing
applications differently, so with careful searching, you can get
a better deal. Start by requesting a loan quote, then compare
numbers, both interest and closing costs.
Just remember that the lowest interest rate will not always be
the cheapest loan. Factor in the cost of fees to be sure you
will come out on top, especially if you plan to sell or
refinance in a couple of years.
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