Refinancing your mortgage? Here’s how to get the best rate



With rates still hovering around record lows, these steps will help you secure the best mortgage refinancing rate. (iStock)

While the coronavirus pandemic has put a strain on the average American’s finances, one of the positives is that current refinancing rates have dropped to an all-time low. This gave homeowners the opportunity to refinance their mortgage and ultimately pay less interest costs over the life of the loan.

You may have noticed that mortgage rates are starting to rise, but this is not a cause for panic. These rates are still hovering just above historic lows, and homeowners interested in refinancing a mortgage still have plenty of time to qualify for the high rates. Take advantage of this by visiting Credible to compare mortgage and refinancing rates from several creditors at once.


It is important to note that not all homeowners will be offered the lowest current mortgage interest rates. Lenders evaluate the homeowner’s financial history before setting a new refinancing rate. To make sure you get the lowest mortgage refinancing rate maybe consider these tips:

1. Improve your credit score.

Until your previous credit rating may be high enough to secure your initial home loan, your current credit rating may not be at the level required to secure the lowest mortgage refinancing rate available. Many lenders will need a credit rating of 620 or higher to refinance a mortgage. Having an excellent credit history can ensure that you are eligible for the lowest flat refinancing rate.

Take action to raise your credit rating before applying for a refinanced loan, checking your credit report for errors, paying your bills on time and keeping your credit card balance below 30% of your allocated credit limit.

2. Improve your debt-to-income ratio.

Just as your credit rating affects your refinancing rate, so does your debt-to-income ratio. This ratio represents your total monthly debt payments divided by your monthly income. You must strive to maintain a debt-to-income ratio between 40% and 50% to be eligible for the lowest refinancing rate. Paying off existing debts will lower your ratio.


3. Compare rates and lenders

Think your bank will offer you the best mortgage refinancing rate? Think again. You should approach mortgage refinancing using the same strategies that you use when making any other important financial decision: searching and comparing offers. It is wise to compare current mortgage refinancing rates from lenders such as your local bank or credit union, as well as request offers from online mortgage lenders.

You can explore all possible options by visiting Credible to compare refinancing rates and mortgage lenders

4. Consider a shorter loan term.

When considering refinancing a home mortgage, many homeowners focus on the rate itself and neglect the term of the loan. If you cannot qualify for the lowest available rate, you can still save significant amounts of money by refinancing for a shorter term loan.

Short term mortgage loans, such as 15 year fixed rate loans, can help you pay off your mortgage faster with lower overall interest charges. In most cases, a shorter loan will result in an increase in the monthly mortgage payment, but homeowners with a high existing interest rate may actually face a drop in monthly payments due to the lower refinancing rate.

Determine your potential monthly mortgage payment using Credible mortgage calculator


5. Be prepared to lock in a low rate; don’t wait for it to drop to a new all-time low

Comparing mortgage and lender interest rates is one of the best ways to find the lowest rate, but that doesn’t mean you should wait until rates hit record lows again. Although The Federal Reserve plans to keep rates low until 2023, lenders may refrain from offering the lowest available rate. Interest rates will continue to fluctuate over the next two years, and current projections suggest that these rates will rise slightly over the next few months. Since even the smallest rate changes can dramatically increase your total interest payments, it is important to lock in the lowest offered rate after comparing multiple lenders.

Keep in mind that while these low rates are tempting, now may not be the right moment for all homeowners to refinance their mortgage. For example, if you do not plan to live in the home long enough to recoup the upfront closing costs, this may not be the right financial decision for you. This is especially true if your new loan lowers your interest rate by less than 1%.

However, if you are in good financial shape, now is still a great time to consider refinancing your mortgage at a lower interest rate. Visit Credible to contact experienced loan officers who are ready to answer all your mortgage refinancing questions.


Do you have a financial question but don’t know who to ask? Write to the Safe Money Specialist at and your question can be answered by Credible in our Money Expert column.


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