Refinance Mortgage Interest Rates

One of the most common reasons to refinance a mortgage is to take advantage of lower interest rates.  Refinance mortgage interest rates depend on many factors. 

Prevailing market interest rates will perhaps have the biggest influence on the interest rate you can expect to get on your mortgage refinance.  If interest rates have dropped since you originally obtained your mortgage, you will likely be able to get a lower interest rate if you refinance.  Even when prevailing interest rates are lower, they will still vary among lenders, so be sure to shop around to obtain the lowest rate. 

The next most important factor that will affect refinance mortgage interest rates is the homeowner’s personal credit history.  If you are considering refinancing your mortgage, you need to ensure that your credit history is in the best shape possible.  Request a free copy of your credit report and make sure that all of the entries are accurate and up to date.  If you can afford to do so, you may wish to pay off some of your smaller debts, such as high interest credit card loans, to reduce your overall debt burden. 

The amount borrowed will also affect the interest rate on a loan.  In general, a larger loan amount will lead to a higher interest rate.  If you have paid down a large amount of your mortgage, you may be able to refinance at a lower rate on the smaller amount now owed.   

The loan term will have a large impact on the mortgage refinance rate.  A shorter-term refinance loan will have a lower interest rate than a longer-term loan.  The monthly payments will be higher with a shorter-term loan, but the lower interest rate can save thousands of dollars in interest over the loan term.  If, however, your main motivation in refinancing is to lower your monthly payment to increase your cash flow, then you may need to stick with a longer term.  If you now have lower income or higher monthly expenses than when you originally got your mortgage, the benefits of a lower monthly payment may outweigh the long term cost savings of a shorter loan term.