Monday, August 28, 2023 / by Sonya Reiselt
Are you considering replacing your existing mortgage with a new loan?
Many homeowners in Beaufort choose to refinance their homes in order to lower their monthly payments and save money in the long term. However, it is important to note that refinancing is only beneficial if you are able to qualify for a new interest rate that is at least one percent lower than your current rate.
The pandemic caused mortgage rates to sharply decline, leading many homeowners to consider refinancing. This resulted in 14 million mortgages being refinanced between 2020 and 2021. However, the market changed in 2022 as rates began to rise, making refinancing less attractive for borrowers.
The housing market and economy influence the rates on mortgage refinancing, but there are factors within your control. With the right knowledge, you can negotiate and get the best deal on refinancing your home's mortgage.
Here are some tips on getting the best mortgage refi rates.
Boost Your Credit Score
When applying for mortgage refinancing, lenders evaluate your creditworthiness based on your credit score. Increasing your credit score by 20 points can make you eligible for a lower interest rate, resulting in potential savings of thousands of dollars throughout the duration of a new loan.
Adopting good credit practices is recommended to improve your credit score. This includes regularly checking your credit report for errors and promptly addressing any inaccuracies. Additionally, ensuring timely payment of bills is crucial as payment history holds significant weight in determining your credit score.
Compare Different Mortgage Offers
Comparing mortgage offers from multiple lenders is crucial for securing the best refinance rates, especially considering the volatility of mortgage rates. By obtaining additional rate quotes, borrowers can save an average of $1,500 over the loan's lifespan. In fact, obtaining five different quotes can lead to even greater savings of up to $3,000.
Purchase Mortgage Points
A mortgage point is an upfront fee that lowers the interest rate on your mortgage refinance. These points can be expensive, especially for large loans. One point is equal to one percent of your loan amount. Buying mortgage points can be a good option for long-term savings. To maximize benefits and save money in the long run, it's important to know when to purchase mortgage points.
Maintain a Good DTI Ratio
When deciding on mortgage refinance interest rates, lenders consider the borrower's debt-to-income (DTI) ratio. The ratio is calculated by dividing monthly debt payments by gross monthly income.
A DTI ratio of 36 percent or lower is considered favorable for mortgage applications, resulting in better refinancing rates. To maintain a good DTI ratio, focus on reducing debts and increasing income.
When it comes to refinancing your mortgage, it's important to resist the temptation of accepting the first offer that comes your way. Making the decision to refinance requires careful consideration and consultation with your mortgage lender. If you need a qualified lender for refinancing information, Walter Dagley with Supreme Lending here in Beaufort would be an excellent choice. He is my lender of choice and has helped many of my clients secure mortgages for their homes and helped with refinancing options.
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