How to Compare Mortgage Refinance Rates

Lesson Summary: In this lesson, you’ll learn how to compare refinance rates when mortgage shopping. You’ll also learn what it takes to qualify for the best rates in the current economy.

A lot of homeowners are trying to refinance their mortgages, because they see how low the rates are right now. According to Freddie Mac, the average interest rate on a 30-year fixed mortgage for the week of October 8 was 4.87%. The average rate for a 15-year fixed is ever lower than that. Those are some pretty appealing numbers! And that’s why so many homeowners are in the market for a refinance loan right now.

But these numbers are just averages. You may qualify for a lower or a higher rate than the averages, based on several factors. And that brings me to the point of this article. Here are some things you need to keep in mind as you compare mortgage refinance rates and move further into the process.

How to Compare Rates When Shopping for a Refi

Affordability

Quick disclaimer. This process will vary from one homeowner to the next. People have different credit scores, incomes, and levels of equity. Lenders have different underwriting guidelines and criteria. When you add these things together, you have plenty of variables.

With that being said, there are certain steps you should go through to compare refinance rates and lenders. Those are the steps I’ve included below.

  1. Before you start comparing rates from different lenders, you should find out where you stand with your equity. If you have little or no equity in the home, you’ll have trouble getting approved for a refinance loan. You’ll need to subtract your current mortgage balance from your home’s current value to determine this.
  2. If you measure your equity and find out that your actually upside down in the loan, you may not be able to refinance at all. There are some new government programs to help people in this situation, but the loan would have to be owned / guaranteed by Freddie Mac or Fannie Mae. You can learn more about upside down refinancing from this article.
  3. It’s also a good idea to check your credit score before you start talking to lenders. This is one of the key factors that will determine the rate you get on your refinance loan. So it’s something you need to know. The last thing you want is for lenders to know more about you than you do. So before you gather quotes and compare refinance rates, get your credit scores from all three reporting companies.
  4. Okay, so you’ve measured your equity and checked your credit, and you feel that you’re a good candidate for refinancing. What next? Now you want to research the average interest rates on mortgage loans, so you have a framework in mind. You can get this information from Freddie Mac’s weekly summary, or from websites such as Bankrate.com and Interest.com.
  5. Now you are armed with the information you need to shop wisely. You know where you stand in terms of credit and equity, and you know the average rates being given out by lenders. Now you’re ready to ask for quotes and compare mortgage refinance rates between different lenders. The Internet makes this process much easier than it was in the past. In fact, you can start the process of gathering refi quotes from this page of our website.

Just remember, the rate is not everything. Yes, it’s one of the ingredients you need to calculate your future savings (and thereby determine if a refinance loan makes sense). But the interest rate is only one piece of the puzzle. You also need to compare the closing cost estimates provided by different lenders, because this could make the loan cost-prohibitive.

The articles below will help you determine when it makes sense to move forward with the process.

Recommended Reading:

I hope this lesson gives you a better understanding of the refi process, and helps you compare refinance rates the right way. Remember, you need to do some research before your start talking to lenders. You don’t want them to know more about your financial situation than you do. So measure your equity, check your credit score, and research the average rates currently being offered. Good luck!


categories Mortgage Refinancing | Brandon | datetime October 10, 2009 9:05 am

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