Interest rates are hitting new record lows, but refinancing isn’t automatic. Here's how you can improve your chances.
There has never been a better time to refinance your mortgage. Rates are at record lows. The economy and job market are improving. But with low appraisals and tighter lending standards, refinancing can be difficult. Here are some tips to improve your chances of successfully refinancing.
1. Repair your credit. Pull a copy of your credit report before beginning the refinancing process. Borrowers with good credit scores of 740 or more generally get the best rates. Under the Fair Credit Reporting Act, borrowers are entitled to one free credit report from each of the three main credit bureaus – Equifax, Experian and TransUnion -- every 12 months.
2. Shorten the loan term. If you are several years into your mortgage, you can maximize your savings by opting for a new loan with a shorter term.
Consider a borrower who took out a $200,000 30-year fixed-rate mortgage with a 5% rate in 2009. Refinancing into a 30-year fixed-rate mortgage with a 3.875% rate would lower monthly payments by $177 to $897, according to HSH.com, and provide about $25,000 in savings over the life of the mortgage. Shift to a 25-year mortgage with the same rate and the payment falls by about $100 less, to $993, but the savings over the life of the loan jump to nearly $50,000.
3. Relationships can make the difference. Banks remain cautious about mortgage lending, but some show more flexibility to their established customers. This is because the bank knows more about you and your financial history. For many banks it is easier to deal with customers they know since part of their job is to manage the risk in giving a loan.
While it may not be as easy as it once was, today's low rates may present a once-in-a-lifetime opportunity to save money on your mortgage. To learn more contact MNB’s mortgage lenders to see if you qualify to refinance.