How to Get a Low-Interest Refinance Mortgage Loan

The timing must be right for a refinance to make sense.

Refinancing a mortgage to obtain a lower interest rate is not always prudent. The current interest rate must be low enough compared with the existing rate to justify the costs involved with refinancing. If a borrower intends to stay in the home for an extended period of time, refinancing is usually a wise choice. The loan fees and closing costs will be offset by the reduced finance charges the borrower will pay. Applying the monthly savings amount to the principal balance will further reduce the finance charges the borrower pays over the term of the loan.

Instructions

1. 

   Go online to find out current interest rates.

   Check online for mortgage refinance interest rates at a website such as Realtor.com. Determine if the timing is right to refinance by comparing current interest rates with your existing mortgage rate. Call your current mortgage lender and find out the exact balance on your loan, which you will need when you apply to other lenders.

2. 

   Call your current lender and discuss refinancing your mortage.

   Make an appointment to speak with the lender that holds your current mortgage. Tell the loan officer you are interested in a low-rate refinance and want information on how to proceed. Inform him that you also intend to apply with other mortgage lenders.

3. 

   Fill out a loan application with your existing lender.

   Complete an application and find out what other information the loan officer requires to process your loan. Inform her that you may call to cancel the application if you find a better offer from a different lender. Tell the loan officer that she can keep your mortgage business by beating the best offer you receive.

4. 

   Check the interest rates other lenders are offering on a refinance.

   Research online lending sources and lenders in your area to compare the different interest rates available for refinancing a mortgage. Fill out an application with a mortgage lender that has an interest rate comparable to your current lender's offer. Find out how long the application process takes, and make a note to contact the lender on the appropriate date.

5. 

   Compare the approvals you receive and choose a lender.

   Go over the different approvals you receive to compare the loan details. Review the closing costs and fees and see if any mortgage lenders will include the costs in the loan amount. Contact the lender you choose and set up a time to close on the refinance loan.

6. 

   Close on the refinance loan.

   Ask the mortgage loan officer if he needs you to bring anything to the closing. Read all of the loan documents and make sure the payment and loan terms are correct. Complete the paperwork and contact the lenders you did not use and thank them for considering your application.

Tips & Warnings

• Ask the lender if you can get a lower rate by having the payments automatically taken from your checking account.

• Pay off credit cards to increase your credit score. A higher score will help you get a lower interest rate on your refinance loan.

• If your new mortgage payment is on a different day of the month, adjust your budget to allow for the change.

References

• Mortgages: The ABCs of Refinancing
• Investopedia: 6 Questions to Ask Before You Refinance
• Realtor: Find a Mortgage Lender

Resources

• The Federal Reserve Board: A Consumer's Guide to Mortgage Refinancings