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Why Right Now Is the Best Time to Refinance Your Mortgage

By: David Bach  |  Last Updated: October 5, 2020
Financial Expert & 10x New York Times Bestseller
This content was originally published on Money.com
IN THIS ARTICLEGet prepared now. Thousands of dollars are at stake
Don’t talk with your current loan officer before getting a quote from other lenders
Don’t put it off in hopes that rates will go lower

The interest rate gods are shining down on homeowners right now, and Americans should take advantage ASAP.

Compare Your Refinance Options With Quicken Loans >

Mortgage rates have been falling for weeks, due in part to the global uncertainty around the Covid-19 pandemic. People are noticing — on Feb. 5, the Mortgage Bankers Association reported that the number of applications was at its highest since summer 2013. Even though the volume of applications has slightly tapered off since, the refinance index is up 165% from this time a year ago.

Thus, it’s a great time to refinance your mortgage. In fact, there’s a huge chance you could lower your rate by 0.5% or 1% by refinancing, which involves applying for a new loan to pay off an existing mortgage (and reaping the benefits).

It’s truly a historical opportunity to cut your rate and potentially save hundreds of dollars, maybe thousands a month, in interest payments. If you took that savings and applied it to pay down your new mortgage faster, you could be debt free five to 10 years sooner and retire sooner.

Here’s how to do it.

Get prepared now. Thousands of dollars are at stake

You’ve probably noticed by now that speed is crucial in this process, so get your refinancing application documents in order.

In particular, pull your credit report and credit score before starting your refinancing journey. Not only can you look it over for errors — and head them off — but you can also get an idea of what type of rate you’ll qualify for.

From there, ask the lender what advice they can share to ensure your application gets approved.

The lender wants to approve and close your loan. They are in the business of doing just that, so don’t fight the process. Get your lender what they need, as fast as they need it.

Don’t talk with your current loan officer before getting a quote from other lenders

There are thousands of dollars at stake, so make lenders fight over you. Be transparent. Let the banks know you’re shopping around and that you want to act quickly. This forces them to give you a competitive rate or risk missing out on your business.

Keep an eye out for fees and any prepayment penalties. But don’t lose your momentum.

It’s critical to shop for a loan fast. You want to do this on the same day and get these banks on your loans and refinance as fast as possible. Shopping and comparing loans on the same day levels the playing field, and you’ll be comparing loans on an apples to apples basis.

Don’t talk with your current loan officer before getting a quote from another lender.

Find Your Rate Today Before Rates Change >

Don’t put it off in hopes that rates will go lower

The No. 1 mistake people make when refinancing their mortgages is waiting to act. Don’t put it off in hopes that rates will go lower.

Mortgage rates shift daily and can be affected by a variety of factors, including oil prices and 10-year Treasury bonds. Because companies have been warning that coronavirus will hurt their earnings, the Federal Reserve has kept rates down. But that won’t last forever.

In early August, the average rate for a 30-year fixed mortgage was 2.88%, according to Freddie Mac. Two weeks later, it was up to 2.99%. Currently, as of September 10, it’s back down to 2.86%.

Now is the time to jump on this.

Check out my top recommendations for mortgage refinance companies

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