Mortgage rates have been at competitive levels since 2020, and we don’t know how long they will stay that way. This means that if you haven’t refinanced your mortgage yet, now might be the time to get the ball rolling.
Refinancing your mortgage simply means exchanging your existing home loan for a new one on better terms. In many cases, this means getting a new mortgage with a lower interest rate than your current rate and lowering your monthly payments accordingly.
But there are things you can do to save even more when refinancing. Here are two moves worth doing.
1. Boost your credit score before applying
Credit scores and mortgage rates tend to have an inverse relationship – the higher your score, the lower your loan interest rate is likely to be. If you are eager to get an interest rate as low as possible during refinancing, it pays to raise your credit score into the upper 700s or more. Some lenders will reward you with their best rates if your score hits the mid-700s, but it’s best to aim a little higher.
How do you increase your credit score? A simple way is to fix errors on your credit report. These errors may be more common than you think, and since you can access your credit report for free each week until April, you have plenty of opportunity to identify errors and follow up on them. .
You can also increase your credit score by paying your bills on time and reducing your existing credit card debt. These tactics, however, could take time. After all, if you had the option of simply paying off your credit card balance, you probably would have done so already.
In fact, it’s important to be patient when trying to build your credit, as it usually won’t happen overnight. But keep going, and in a few months you could see a nice improvement.
2. Look for different offers
When it comes to refinancing, each lender sets their own rate and closing costs. So the more offers you collect during the refinance, the easier it will be for you to identify the best one.
It’s perfectly okay to contact your existing mortgage lender and see what offer you get there. But keep in mind that your current lender may not have the best deal available, which is why it’s important to shop around.
Now, one thing you need to know is that when you apply for a mortgage refinance, each lender does a thorough investigation of your credit report to see if you are a viable candidate. One serious inquiry isn’t usually a big deal, as it should only take five to ten points off your credit score. But several difficult requests could cause more damage.
However, if you make all of your rate purchases within the same two-week period, your various refinance requests will count as one credit request because they are all made for the same purpose. And it will help you minimize any potential impact on your credit score.
Refinancing your mortgage could be a smart move this year. Follow these additional steps and you may be able to enjoy even more savings.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Our expert recommends this company for finding a low rate – and in fact he’s used them himself for refi (twice!).
Read our free review
We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.