Refinancing your home to take advantage of today’s lowest-ever mortgage rates has been one of 2020’s hottest crazes, right up there with baking your own bread, wearing joggers and making TikTok videos.
Homeowners this year have been refinancing at more than double the rate seen in 2019, according to research from Attom Data Solutions.
refinance and save. An estimated 19 million Americans could refi and lower their interest rates enough to slash their monthly payments by an average $299, says mortgage data firm Black Knight.” data-reactid=”34″Plummeting mortgage rates have given homeowners a major incentive to refinance and save. An estimated 19 million Americans could refi and lower their interest rates enough to slash their monthly payments by an average $299, says mortgage data firm Black Knight.
Rates have dropped to their 10th record low this year, in the long-running weekly survey from mortgage giant Freddie Mac. Some lenders are advertising 30-year rates at 2.5% and even lower.
But borrowers need to hurry to beat a new refinance fee taking effect later this fall. Here are four tips on how to get the very best deal when refinancing into a fresh 30-year mortgage.
1. Get several mortgage offers and compare rates
Refinancing into another 30-year loan can be the right choice if your current mortgage is relatively young. You won’t be stretching out your interest costs all that much if you’ve been in the home just a year or two.
But borrowers can’t assume they’ll always be be presented with the lowest rates possible. Different lenders can offer the same homeowner vastly different refinance rates, especially since some are already factoring in a new 0.5% fee on refi loans that officially starts Dec. 1.
To find your best refinance deal, you’ve got to shop around and compare rates — not stop your search at the very first loan you’re offered.
get five rate quotes, you’ll pay lifetime costs averaging $3,000 less than if you end your search after hearing from just one lender.” data-reactid=”66″Hunting for a rock-bottom rate is worth it. A Freddie Mac study found if you get five rate quotes, you’ll pay lifetime costs averaging $3,000 less than if you end your search after hearing from just one lender.
2. Spruce up your credit score
A better credit score brings better mortgage rates. Lenders like borrowers whose credit scores are very good (in the 740-to-799 range) if not exceptional (800 to 850).
To get the kind of refinance loan that will save you hundreds of dollars a month, you’ll need a score of at least 720, Black Knight says.
get a look at it for free.” data-reactid=”70″Don’t know your credit score? It’s easy enough to get a look at it for free.
If you find your credit score needs some help, take steps to raise it:
- Pay down debt, especially on credit cards. A debt consolidation loan might help you get rid of credit card debt more quickly, and at much lower interest.
- Don’t open new credit cards, but don’t close old ones either. If you do that, you’ll reduce your available credit — which could hurt your score.
- Get your hands on your credit reports and make sure there are no errors that could be dragging down your credit score. A 2012 study from the Federal Trade Commission found 20% of U.S. consumers had potentially costly mistakes on their credit reports.
3. Show a lender you’re invested in your home
score the lowest 30-year refinance rates.” data-reactid=”101″Refinancing homeowners who have healthy amounts of equity in their homes tend to score the lowest 30-year refinance rates.
Equity is the percentage of your home’s value that you own. To determine your equity, take the amount you’ve already paid on your home and divide that by what the house is currently worth. That figure — which should be to the right of a decimal point — represents your equity percentage.
To a lender, the ideal refi candidate has at least 20% equity, Black Knight says. If you still have a ways to go to reach the 20% level, you’ll want to make a down payment that will put you over the line.
As an added bonus, you won’t be forced to buy or keep paying for private mortgage insurance, if you’ve got at…
Read More: How to score an ultra-low 30-year mortgage rate for your refinance