6 Tips for Refinancing a Fixed Rate Loan

While interest rates are still hovering around historical lows, it may be the best time to consider refinancing a fixed-rate mortgage. Refinancing a conventional mortgage before rates skyrocket is the best way to further your savings. 

However, there are a few other considerations to contemplate to get the most out of your refinance. Keep reading to discover six tips to keep in mind when refinancing a fixed-rate mortgage. 

Check Your Credit Score

When refinancing, your credit score is one of the most influential elements in obtaining a desirable interest rate. In most cases, having a higher credit score means getting a lower rate and vice versa. 

A conventional refinance typically requires a credit score between 620-720. There are also additional considerations like your cash reserves, debt-to-income ratio and loan-to-value. Of course, each lender has its policies and may be lenient with credit scores at the expense of a higher rate.

However, your credit score heavily influences the rates you receive at the end of the day. For example, a one-point increase can reduce your fees by a whole point. That means you pay $1,000 less for every $100,000 you borrow. 

The best first step before inquiring about a refinance is to get your personalized credit report. A recent study showed more than 2,000 out of 6,000 participants found at least one error in their credit report. It’s best not to cut corners and request reports from all three companies. 

Under federal law, each consumer is allowed one free report every twelve months from Experian, Equifax and Transunion. Scrutinize every detail and immediately report any discrepancies you find. 

Shop Around

When you shop around for a car, do you purchase the first one you lay your eyes on without attempting to cut a deal? Unfortunately, that’s exactly what many homeowners do when refinancing a fixed-rate mortgage. 

The fact remains that not shopping around can potentially cost you thousands of dollars over the life of the loan. Once you determine your credit score, you can allow multiple lenders to check your credit report within a limited period. The best thing is, various lenders can check your credit report, and it’ll count as a single inquiry. Depending on the lender’s system, that time frame could be anywhere between 14 to 45 consecutive days. 

When homeowners can save up to 0.50 percent on their refinances, that adds up to multiple thousands in mortgage interest savings in as little as ten years. 

Many people don’t realize that a refinance offer isn’t final. In addition to negotiating rates, lenders may be open to negotiating fees. And one strong method of negotiation is to arm yourself with multiple offers. 

Cash-Out Refinancing 

While many people might not have substantial cash reserves, at least a quarter of homeowners have as much as 50 percent untapped equity in their homes. 

For these homeowners, a cash-out refinance makes perfect sense as their best option. However, where many people make mistakes is they use the additional money to finance short-term liabilities. 

For example, using an additional $100,000 to buy a cigarette boat, which quickly loses value, doesn’t exactly justify taking on a 30-year conventional loan. On the other hand, using that money to consolidate high-interest debt or invest in home improvements for long-term returns is well worth it. 

Consider Closing Costs and Other Fees

When refinancing a fixed-rate mortgage, you want to consider how long you plan on keeping the home. That’s because refinancing comes with potentially hefty closing costs like when you took on the initial loan. 

A better interest that lowers your monthly payments by a couple of hundred dollars is certainly enticing. However, if the refinance costs amount to a few thousand dollars, you might have to stay in your home longer than anticipated to recoup the costs. 


Another element to consider when refinancing is to determine how much equity you have in your home. While companies vary in regards to their lending standards, having at least 20 percent will get you a better deal. 

If you’ve had your home for a while with a moderate amount of equity, it’s possible to receive a refinance amount lower than your original term. So not only are you receiving a lower interest rate, but you’re also reducing your monthly payments further by paying back a smaller loan. 

Next Steps to Refinancing a Fixed-Rate Mortgage

Refinancing a fixed-rate mortgage can be intimidating and confusing. The best way to get started is to take an active role in the process by staying on top of your credit report and being aware of what can help get you the best rates available. 

Refinancing a conventional mortgage is about more than lower rates. Consider the other elements mentioned here to receive the most out of a refinance. Get in touch with one of our specialists online or by phone at (855) 414-0787 to see how we can help you with your conventional refinance. 

When refinancing an existing loan, total finance charges may be higher over the life of the loan.

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