How to Lock in the Best Refinance Rates

It is crucial to find the best refinance rates to help save money on a mortgage. The difference between a 5.5% mortgage rate and a 4.5% rate on a $200,000 loan for a 30 year mortgage is $122.21 per month. Calculate those monthly savings out over the 30 year loan and you are saving just under $44,000 on your home.

There are many factors that help to dictate mortgage rates, including the overall economy. In recessionary times, interest rates will remain low to help spur economic growth. On the other hand, boom times means it cost more to borrow money, which may prevent homeowners from locking in the best refinance rates.

While the economy plays a big role in what kind of refinance rate you can except, here are some other factors to consider.

Here is a list of ways to help homeowners lock in the best refinance rates available.

1. Opt For a Lower Term Mortgage - One of the easiest ways to lock in the best refinance rates is to opt for a mortgage with fewer years. For example, moving from a 30 year fixed rate mortgage to a 15 year mortgage will help you lock in a lower interest rate. Adjustable rate mortgages (ARMs) will usually offer much lower rates compared to a longer term loan. If you decide on an ARM, make sure you fully understand its limitations and consequences.
2. Consider the Closing Costs - There is no such thing as a zero cost refinance, even though lenders may market these types of loans. When looking for the best refinance rates, make sure to factor in closing costs of each lender when you are comparing different options. Some lenders may offer much better rates but charge higher closing costs. The lower rate with the higher closing cost may not be the cheaper loan in many cases.
3. Improve Your Credit Score - The best refinance rates that are advertised may not be available to you if you have questionable credit. Long before you decide to refinance, make sure you work to improve your credit score. Since the housing market meltdown a few years ago, lenders have tightened their lending standards which has increased the credit score requirements to get the best available rates.
4. Join a Credit Union - If you do not belong to a credit union, then consider joining one. If you already belong to one, then investigate the refinance rates they offer. Credit unions operate with a different goal than a bank or other types of lenders. A credit unions main purpose is to server the best interests of its members. This means they have lower lender standards for their customers, and usually don't require great credit to receive the best refinance rates.
5. Check With Your Current Lender - This may seem like the obvious, but many homeowners look outside their current lender for refinancing. In many cases, your current lender can offer you the best refinance rates available in order to keep your business. Your current lender will also usually charge the lowest closing costs as you already have a mortgage with them.

There are plenty of advantages of refinancing your home, which include lowering your monthly mortgage payment. Other homeowners may choose to refinance as a way to knock years of off their loan, thus reducing the overall amount of interest that is paid. Then there are those homeowners who are looking for a cash out refinance to help pay for things like a remodeling project, medical expenses, or to pay for college.

Regardless the goal of the homeowner, locking in the best refinance rates is critical to meeting the goals of a new mortgage. Using some of the tips listed above can help to ensure you will get the best available market rate.