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How to get a low mortgage refinance rate now

Reduce Interest Rate
Here's a step-by-step guide to finding and locking in the lowest possible mortgage interest rates - and what to keep in mind along the way. Bill Oxford/Getty Images

Mortgage refinancing essentially involves taking out a new mortgage loan to replace an existing one, preferably at a lower interest rate. Homeowners will then repay that new loan according to their new repayment terms.

Mortgage refinance loans can be very beneficial for borrowers. These loans allow homeowners to reduce the interest charged on their home loan, adjust a monthly payment to better fit their budget, pay off their home faster, pull out a portion of their home's equity in cash or any combination of these. 

If this sounds like something that you could benefit from then start exploring your mortgage refinancing options now. You can also use the table below to check interest rates and eligibility.

Remember: the lower the interest rate on your refi loan, the less your mortgage repayment will cost you in the end. But qualifying for the lowest possible rates can take a little bit of effort and preparation, as they're usually reserved for the most qualified applicants. 

Here's a step-by-step guide to finding and locking in the lowest possible mortgage interest rates, and what to keep in mind along the way.

How to get a low mortgage refinance rate now

  1. Shop around and compare lenders
  2. Pay down debt
  3. Reduce your debt-to-income ratio
  4. Check your credit report for errors
  5. Increase your credit score
  6. Avoid adding any new debt

1. Shop around and compare lenders

Baseline mortgage refinance rates are dictated by the Federal Reserve and limited by the current economic environment. This means that there's only so low your rate can get, no matter how high your credit score or how low-risk of a borrower you may be. 

With that said, though, there are some lenders that offer lower interest rates than others, which may be a better fit for you and your specific situation. For that reason, it's always wise to shop around and compare mortgage lenders before deciding on a refinance loan. This is easy to do - use the table below to get started.

Be sure to take into account all expenses involved with your loan estimate. While getting the lowest possible interest rate is always the goal, also consider whether your lender will charge you points, has higher fees than other lenders, or limits the type of mortgage loan you're offered.

2. Pay down debt

According to data from the Federal Reserve, consumer debt is at an all-time high, topping $16 trillion for the first time ever. While these numbers can be scary, it's important to note that debt, in and of itself, isn't inherently evil, and can serve many purposes. It's just important to manage how much debt you have and what sort of balances you carry.

Paying down some of your debt before applying for a mortgage refinance loan can be one way to potentially snag a lower interest rate. Smaller balances can help you by:

  • Lowering your credit utilization ratio
  • Reducing your overall debt burden
  • Freeing up your budget
  • Reducing the amount of interest you'll pay on that debt

Each of these can not only help boost your credit score and put more money in your pocket each month but can also make you a more enticing applicant to a mortgage lender.

3. Reduce your debt-to-income ratio

Your debt-to-income ratio, or DTI, is the percentage of your monthly income that's already spoken for by outstanding debt agreements. If you owe too much (and have too high a DTI), a mortgage lender could decide that you are a risky borrower.

That can result in a higher interest rate on your refi loan. 

To better your chances of a lower mortgage refinance interest rate, spend some time reducing your DTI (if you can). This can be done in one of two ways: eliminating some debt or earning more money. If you can accomplish both before applying for your mortgage refi, even better.

Speak to a mortgage refinance expert today who can help advise you. 

4. Check your credit report for errors

According to the FTC, more than one-fifth of American adults have an error on their credit reports. Depending on what that error is, it could potentially impact your credit score and, in turn, the interest rate you're offered on your refi.

Be sure to request a credit report so you know exactly what's being reported to credit agencies.

Once you get each report, look through it carefully for errors. These could include:

  • Accounts that you don't recognize
  • Duplicate accounts or balances
  • Payments marked late, which were actually made on time
  • Incorrect balances or credit limits
  • Incorrect dates
  • Names or addresses that don't belong to you
  • Open accounts that were closed, or vice versa
  • Hard inquiries that you never requested or approved

If you do find an error, reach out to the creditor and/or the reporting agency to file a dispute. 

A single erroneous late payment could dock your credit score by tens of points, and even result in a higher mortgage refi interest rate… so be sure to look carefully for any and all mistakes.

5. Increase your credit score

The higher your credit score, the easier it will be to qualify for a mortgage refinance loan and the better your chances of a lower interest rate. So, boosting your credit score can be a great first step when preparing for a refi.

We've already mentioned a few ways that you can increase your score (paying off debt, correcting errors, etc.). If you need more help, you can also do things like request a higher credit limit (which will lower your credit utilization) or ask a credit-conscious family member to add you to one of their cards as an authorized user.

Otherwise, increasing your credit score is just a factor of time. The longer you responsibly manage your accounts, the better your score will be — so make sure to time your mortgage application accordingly.

6. Avoid adding any new debt

Adding new debt to your credit report can dock your score and give potential new lenders pause. That's because new accounts will:

  • Increase your total debt burden
  • Increase your monthly debt obligation (and, in turn, your DTI)
  • Drop your average age of accounts
  • Add a new hard inquiry to your credit report

For these reasons, you should try to avoid applying for or opening any new accounts leading up to your mortgage refinance.

The bottom line

One great way to save money on your home is to lock in a lower mortgage refinance interest rate. The best rates are typically reserved for borrowers with the best credit histories and lowest risk profiles, so enhancing these factors can improve the rates you're offered.

While interest rates can only go so low on mortgage refinance loans, locking in the best rate available to you can help reduce your monthly payment, get you out of debt sooner, and lower the total cost of your home. So start exploring your mortgage refinance options here today or simply use the table below to check rates and eligibility. 

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