How to Compare Mortgage Refinancing Rates

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    How to Compare Mortgage Refinancing Rates

    As a homeowner with an outstanding mortgage balance, you can benefit from refinancing. With relatively low interest rates and uncertain times, it might be a good idea to find a way to lower your monthly mortgage payment.

    But how does mortgage refinancing work and how do you sort out all of the lenders to find the right loan for you? In today’s article, we’re going to show you how to compare mortgage refinance rates right now.

    This article is in collaboration with Credit Karma Home. If you’re looking for a quick and easy way to shop for rates and see if you can save on your mortgage, check out Credit Karma Home here >>

    Are Mortgage Rates Still Attractive?

    Although mortgage rates rose a bit in 2021, that doesn’t mean they aren’t attractive. Homeowners can still take advantage of low interest rates to cut their monthly payments and / or shorten their payment term in order to repay their mortgage faster.

    The chart below from the Federal Reserve Economic Data (FRED) shows that mortgage rates are still close to their all-time low (currently at 3.00%).

    how to compare mortgage refinancing rates

    And although interest rates have risen slightly from their January 2021 lows, they are still lower than they were at that point in 2020.

    Unfortunately, the lows may not last too long. Freddie Mac said the recovering economy could lead to higher mortgage rates in the coming months.

    How does mortgage refinancing work?

    Mortgage refinancing replaces your existing mortgage with a completely new one. When you take out the refinanced mortgage, the funds will be used to pay off the outstanding balance on your current mortgage.

    When it comes to refinancing your mortgage, there are two main loan products available: interest and term refinancing and disbursement refinancing. This is how both options work.

    Interest and term refinancing

    The interest rate and maturity refinance option is probably what you think of when you think of a refinance. In that case, you would borrow the balance of your outstanding mortgage. The new lender offers you different interest rates and terms based on the current interest rate environment, your creditworthiness, debt to income ratio, and other factors.

    Being able to get a new mortgage quote at a lower interest rate can lower your monthly payments while saving money on interest expenses over the life of your loan. In addition, you can choose a term that will create the appropriate monthly payment for your budget.

    Sites like Credit Karma Home make it easy to identify different mortgage types when purchasing a mortgage refinance. On one page, you can quickly see a 30 year fixed rate, a 15 year fixed rate, and even a 5/1 ARM (adjustable rate mortgage). You can buy a mortgage here >>

    Disbursement Refinancing

    Withdrawal refinancing is exactly what it sounds like. You can pull cash out of the equity you’ve built up in your home and use the funds however you want. Often times, homeowners choose to withdraw cash during a refinance to consolidate debt or do renovations.

    If you have credit card or personal loan debt, repaying it with the proceeds from a withdrawal refinance can help you lower your interest rate significantly. For example, the average credit card rate is currently more than 10 percentage points above mortgage rates.

    You can also use home equity to invest in your property and increase its value. The money can be used, for example, to update your windows, renovate your kitchen or replace your roof.

    If you are considering a withdrawal refinance, compare this loan to a home equity loan or HELOC. Either way, you increase the balance on your current mortgage. However, depending on your situation, one type of loan may be a better option than the other.

    How to Compare Mortgage Refinancing Rates

    Ready to compare mortgage refinance rates. Here are the steps you should take to find the right mortgage refinancing loan for your situation.

    Look at your goals

    If you want to streamline your finances by saving money on interest payments, classic refinancing is the answer you’re looking for. However, if you need money to cover an expense, payout refinancing can provide the funds you need.

    Whether you choose an interest rate and term or a payout refinance, remember that you have the option to lower your interest rate even further by purchasing mortgage points. Typically, you pay 1% of the loan amount to lower your interest rate by 0.25%.

    Buying points can be a great option if you plan to be staying in your home for an extended period of time. However, if you plan to sell your home in a few years time, you may not save enough interest before you sell to offset the upfront fees you paid. Learn how to calculate your break-even point.

    Take some time to consider why you want to refinance before you shop. Having a clear idea of ​​what you want to achieve with your refinance will help you narrow down your options faster.

    Compare lenders

    Not all mortgage lenders are created alike. While a mortgage may seem like a standard product with the same offers available from every lender, it is not. It is important to look around.

    Remember, comparing mortgage refinance rates on sites like Credit Karma will not affect your creditworthiness. Rate shoppers have a window of time where multiple tough inquiries regarding their credit scores are treated as one. This shopping window can range from 14 days (most common) to 45 days, depending on the lender’s rating model.

    Discover different interest rates and terms

    You don’t want to overpay your mortgage. Start by comparing the rates and terms available from different lenders. By shopping, you can ensure that you are getting the best deal on your new loan.

    Not sure where to start? We have compiled a list of the best places to refinance your mortgage in 2021. However, if you don’t want to spend time browsing the offers of different lenders, then you should check out Credit Karma Home. This comparison shopping tool allows you to explore offers from dozens of lenders in one quick process.

    One of the great features is that you can quickly see your interest rate, monthly payment, and any refinancing-related fees.

    Check the customer service reviews

    A mortgage is a long-term financial product that starts with weeks of paperwork. Whether it’s your first time home buying or mortgage refinancing, there is a lot of paperwork involved.

    Unfortunately, a lender with a poor track record of serving their customers can lead to a number of headaches for you. So take a minute to review a prospective lender’s customer service reviews before signing on the dotted line. On Credit Karma Home, you can read unbiased customer reviews for each of its affiliate lenders.

    Close up and enjoy your refinanced terms

    Although the refinancing process can take some time and energy, the end results can be worth the effort. If you’ve taken the time to look around carefully, you can relax in the glow of thousands of interest payments or cash to keep large expenses under control.

    Final thoughts

    Mortgage refinancing can be a good idea if you can find interest rates and terms that exceed your current mortgage rates and terms. Take some time to consider how your financial picture could improve if you seek refinancing.

    If you’re unsure where to start, contact Credit Karma Home to compare mortgage refinance rates in your area. You will be surprised how much you can save. Request an offer here >>

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