Refinance Mortgage Rates

When to Look for Lower Refinance Mortgage Rates

Regardless of the rates on your original mortgage, you may be able to get better refinance mortgage rates for several reasons. As you search for the best refinance mortgage rates, you may get a better deal from simply renegotiating the loan from the original lender. But it may also be that you can get better refinance mortgage rates from a new source.

One reason that refinance mortgage rates can be lower than the initial rates is that your principal amount and the amount of value to equity has changed over the course of the loan to this point. Many lenders offer a specific interest rate for mortgages, but the interest rate can change depending on the percentage of the market value that is being financed. For example, if you are purchasing or refinancing a home that is valued at $100,000, and you need to borrow $80,000, the interest rate will be set by these lenders at a specific level. But if you only borrow $50,000 on a home that is valued at $100,000, the interest rate offered by that same lender may be significantly lower. This is one reason that your refinance mortgage rates may be lower than the interest rates of the original loan.

Your payment practices during the course of your loan can also affect your refinance mortgage rates. If you had less than perfect credit when you took out the initial loan, the lender may have charged you a higher interest rate than customers with excellent credit. When you consider refinancing that mortgage, you may find that making all your payments on time has improved your credit rating overall and increased your value to the lender. The refinance mortgage rates may be lower because of your improved credit rating. By the same token, you may find that your refinance mortgage rates are higher if you've made late payments or otherwise hurt your credit rating over the course of the loan.

Some people decide to refinance at a specific time because interest rates as a whole have dropped. If that's the reason for your refinancing, keep in mind that you're going to pay closing costs on the refinancing loan. For that reason, only a drop of at least one and a half to two percent is likely to save you any significant money. If your refinance mortgage rates are only a fraction lower, you'll have to pay on the loan for several years to save the amount of the closing costs.