How to Refinance Your Mortgage for a Lower Interest Rate
Getting a lower rate is the number one reason people refinance. After helping thousands of homeowners refinance over the past 17 years with clients across the United States, I have distilled the process into five steps that give you the best chance at a rate that could meaningfully reduce your payment.
Step 1: Know Your Current Rate and Terms
Before you do anything else, check your most recent mortgage statement. Know your current interest rate, remaining balance, and how many years you have left. This is your baseline for comparison.
Step 2: Check Your Credit Score
Your credit score is the biggest factor you control. Higher scores tend to qualify for lower rates. If your score has room for improvement, consider these steps before applying:
- Pay down credit card balances below 30 percent of your limits
- Do not open new credit accounts
- Check your credit report for errors and dispute any you find
- Make all payments on time
Even a small score improvement could make a difference in the rate you are offered.
Step 3: Build Equity
Your loan-to-value ratio matters. The more equity you have, the less risk the lender takes on, and the better your rate options tend to be. If your home has gone up in value or you have paid down your balance, you may be in a better position than you think.
Step 4: Shop Around
Different lenders offer different rates for the same borrower. Do not assume your first quote is the best one. Get rate quotes from multiple lenders and compare the total package: rate, closing costs, and terms.
Mortgage inquiries within a short window (usually 14 to 45 days) count as a single inquiry on your credit report. So shopping around does not hurt your score.
Step 5: Consider Paying Points
Discount points let you buy a lower rate by paying more upfront at closing. One point typically costs one percent of your loan amount and may lower your rate by a fraction of a percent. This can make sense if you plan to keep the loan for a long time, because you will save more over the life of the loan than you paid upfront.
Run the Numbers
The goal is to find the combination of rate, closing costs, and loan term that saves you the most money for your situation. Check your rate at Lendtrain in 30 seconds to see what you could qualify for today.
Rate quotes are estimates based on the credit score you enter. Actual rates may differ based on verified credit, income, and property details. Lendtrain (NMLS# 1844873) is a licensed mortgage broker. Equal Housing Opportunity.