Lowest Mortgage Rates and Lowest Refinance Rates

Get the Lowest Mortgage Rates

The lowest mortgage rates can be found in various places.  We have previously covered how to find the best rates, focusing on where to look to access the best rates.  This page takes that a step further and helps you ensure that once you find the best rates you can ensure that you qualify for the lowest home mortgage rates possible from that broker or bank.  The advice on this page may help you get the lowest refinance rates possible.  You may not be able to do all of these tips, but if you can do at least some you should position yourself for the lowest mortgage interest rates possible.  Keep in mind that while rates may be equivalent across a variety of lenders, the actual terms of your refi can vary in ways that can cost or save you a lot of money.

Lowest Mortgage Rates Tips

You can use the following tips to ensure that you are getting the lowest mortgage rates you qualify for:

Credit Scores and the Lowest Refinance Rates

Keep your credit score high.  Yes, this one is the most obvious, but many of us do not understand exactly what goes into a credit score, and mistakenly assume we can change our score quickly enough when home mortgage refinance rates start to go down.  Credit scores just don’t change that fast.  Maintain a high credit score so that you can take advantage of the lowest refinance rates – if your score is too low, and even if there are items on your credit report that are incorrect and you can fix, it will be far too late to do so in order to refi.  Make sure you know your credit score from all three major credit bureaus – it is possible that one or the other may have bad information that can be corrected, but it may be too late at the point at which you want to grab one of the lowest mortgage rates.

Make sure your spouse also has a high enough credit score.  You’ll likely qualify for a higher amount in your loan if you both go in together (especially if he or she works), but you could then be held back by the lower of your two credit scores.  Make sure when you pull your credit report you pull his or hers too, and address everything you can aggressively.  You both need low credit scores to get the lowest mortgage rates and best terms on your refi.

Increase Your Equity for the Lowest Mortgage Rates

Consider trimming what you owe on your home.  Increased equity can help you get the lowest mortgage rates.  For example, if you currently owe 80% of your home’s value, and can afford to pay off 5% with money you have in the bank, you may get a lower rate based on only owing 75% of the home’s value.  Plan to make this payoff at closing – and tell your bank or broker you can do it if it will bring you the lowest refinance rates possible.  This will be especially effective when you are close to certain cut-offs, like 90%, 85%, and 80%.  Your bank or broker will likely suggest this, but it may also be helpful as your shop around for that person in the first place in order to get the lowest home refinance rates.

Choose Your Bank Wisely for Lowest Refinance Rates

Make sure you look at each “category” of lender because sometimes they differ in what they offer – call a mortgage broker, a large bank, a local (small) bank, a credit union, and an internet lender.  Each of these lenders way offer a slightly different loan product – the rates may be the same, but the terms and conditions may be different.  And in some cases one type of lender or the other will have the lowest mortgage rates available.

Get an assurance that your broker or bank will be organized enough to close your loan on time, before your rate lock expires.  You need to take responsibility for this as well – make sure you return any paperwork quickly, do not put the appraiser off a few days when s/he calls, and stay in touch with your broker or bank during the process.  The best way to check on this is to find out what the lender’s – whether a bank or broker – reputation is for following through on each refinance.  This is one of the main things to check out about a mortgage lender or bank beforehand, all else being equal.  If your broker cannot close your loan on time you could lose your opportunity to get the lowest refinance rates.

Terms and Lowest Mortgage Rates

Assess whether you can afford a shorter length of time (term), like 25 or even 20 years instead of 30 years because a shorter mortgage often comes with the lowest mortgage rates.  Generally shorter terms carry lower interest rates, but be sure that you will be able to meet the higher payments of the short loan.

See if you can get a free “float” meaning that you will be able to re-lock before you close if home mortgage interest rates go down.  This can be very valuable, but make sure there are no fees for this.  Also, make sure your refi does not have any clauses that might prevent you from refinancing in the future after you close.  Though rare, some loans have penalties if you pay them off too quickly after you close.

Carefully assess whether a “buy down” will work for you – such as paying points or higher fees at closing – in order to get a better rate.  In some cases, particularly if you are sure that rates are at close to bottom and you will not be moving in a long time, this can be a good idea.  This is a complicated topic that is covered in some of the blog posts on the main page.

Make sure you can refinance soon after you close Some lenders will charge a hefty penalty if you try to refi 30, 60, or sometimes even 90 days after you close your original refinance with them.  This could mean that you lose an opportunity to get the lowest refinance rates if they suddenly drop after you close.  Make sure to ask what the lender’s policy is about how soon after closing on your refi you could refinance again.

When to Lock for Lowest Refinance Rates

Follow your gut when it comes to locking – often times waiting and waiting to see if rates will fall even farther can lead you to losing a good opportunity.  There’s no way to know when rates have hit bottom, but, particularly if you are offered a float, you may want to lock as soon as you can save significant money.  There are many people who have waited, hoping for a small drop, and lost out on the lowest refinance rates as a result, so consider this carefully.

More advice about the process and how to get the lowest home mortgage rates will be added soon, but these are certainly the top ten ways to get the lowest mortgage interest rates and best terms on your loan. As always, we hope this independent and unbiased advice about when to refi was helpful!

Lowest Refinance Rates Using a Float

The decision about whether to refi is often relatively simple and based on how to get the lowest mortgage refinance rates.  But the refinance choices that come after that initial decision are the ones that require more research and knowledge.  A “Buy Down” or a “Float” can be very helpful.  Put simply, a “buy down” is when for adding money in fees and/or points you can lower the interest rate your will pay on your mortgage after refinancing.  A “float” is when you are allowed to re-lock into a lower interest rate if mortgage rates drop while you are in the refinance process.  In both cases you need to assess how much you will save with the lower rate versus the cost of the float or buy down.  Is the math as simple as it sounds?  Not really.

Now if the difference between what you will save with the float or buy down over the number of years you will live in that home versus the cost is highly significant, you don’t need to read any further.  But if the float or buy down provides minimal to moderate savings, you need to know what “Future Value” means.  Think of it this way: If you have to pay a large amount of money for anything, in this case a refinance float or buy down, that money cannot be used for anything else and someone else will get the interest on it.

An Example of how a Float Gets You the Lowest Refinance Rates

Consider an example with the most basic math: Imagine that the buy down costs you $10,000 in points and fees.  You are initially happy because the savings with the buy down will be $11,000 over the ten years you will live in your home.  The decision is easy, right?  It’s $1,000 better to get the mortgage rate buy down.  Not necessarily.  Imagine that instead of the buy down you put the same $10,000 into a CD with 3% annual return.  Depending on how often the CD compounds, you will likely have around $13,500 when it matures.  The future value of your money is actually $13,500.

Often the calculations of future value is much more complicated than that, and it may be worth meeting with a financial adviser if so.  Getting the lowest home refinance rates often requires a calculation of the alternative ways you can use your money.

Zillow is a great place to get information about current lowest bank rates for refinancing, while the well-known realtor.com also provides a marketplace that can help you find the lowest rates.  CNBC has a nice page about getting the lowest rates on your mortgage.

Best of luck as you use this information and other advice to try to get the lowest refinance rates you can, and please feel free to let others know how you’ve been able to get the lowest mortgage rates.