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If you feel you're paying too much interest on your mortgage, it makes sense to look into refinancing. By lowering your interest rate, you could make your home far more affordable. You might even pay it off more quickly. Here's what today's mortgage refinance rates look like.
Refinancing is the process of swapping one loan for another, and it's common in the context of mortgages. When you refinance a mortgage, your old home loan is replaced by a new one with different terms. Usually, that means a lower interest rate than the rate you've been paying. In some cases, refinancing might change the length of your repayment period. For example, you might go from a 15-year to a 30-year loan, or vice versa.
As is the case when signing a regular mortgage, you'll need good credit to refinance. You'll also be subject to closing costs, which come into play with a regular mortgage as well.
Start by applying to refinance with a number of mortgage lenders. You may find that different lenders have different offers, or varying standards for qualifying for the best mortgage rates. For example, one lender may be more flexible with your credit score than another -- it pays to seek out multiple offers.
If you're going to apply to refinance with multiple lenders, do so within a 30-day period. Each time you apply to refinance, it's considered a hard inquiry, which can affect your credit score slightly. A single hard inquiry generally isn't a big deal, but multiple hard inquiries can have a larger negative impact on your credit score. Fortunately, if you apply to refinance with multiple lenders within the same short time frame, those various hard inquiries for the same purpose will be considered only a single inquiry.
When shopping around for a refinance offer, keep these things in mind:
Refinancing is a good way to reduce the interest rate you're paying on your mortgage, which can result in substantial savings over time. But remember, there's a cost associated with refinancing, so if you're going to swap your old mortgage for a new one, make sure you plan to stay in your home long enough to recoup that expense and come out ahead.
For example, imagine you're looking at a $200,000 mortgage refinance with closing costs of 3%, or $6,000. If refinancing lowers your mortgage payments by $150 a month, it will take you 40 months to break even, and you'll start reaping savings only then. If you don't plan to stay in your home for more than 40 months, refinancing doesn't make sense. Some of our favorite mortgage lenders for refinancing have below-average fees, but refinancing is still likely to cost you something.
Also, if your credit score isn't in great shape, refinancing may not be worthwhile, as you may not snag a rate you're happy with. On the other hand, if your credit score has improved substantially since you signed your original mortgage, you may be eligible for a much more favorable rate that saves you a lot of money in the long run.
Refinancing a mortgage means obtaining a brand-new mortgage to replace your current one.
It's essential to shop around to find the best refinance rates. You may find that different lenders have offers that vary widely.
Yes. Homeowners can refinance as often as they'd like, but some lenders may have specific restrictions.
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