Applying for a mortgage refinance today is relatively easy. With the ability to request a free rate quote online, get prequalified in minutes, and send and receive digital preapproval letters, the process of beginning your home refinancing journey can be done quicker than ever, which is why you shouldn’t feel rushed into accepting the very first offer that comes your way. In fact, since mortgage rates can change daily, getting multiple quotes on a mortgage refinance at the same time can help you get a more accurate picture of interest rate trends.
How Rates Change in the Mortgage Industry
Let’s say you get a rate quote from lender A tomorrow morning. It sounds pretty good, but you want to shop around. You get a quote from lender B the next afternoon. Lender B’s offer is lower than Lender A’s was, so you assume they have a better deal. But what you’re not taking into consideration is day-to-day rate offers from different lenders don’t necessarily provide an apples-to-apples comparison.
Put simply? Mortgage rates change daily. Just because Lender B’s rate seemed lower a day later, doesn’t mean Lender A wasn’t offering the same (or lower) rate that same day. If you aren’t getting multiple simultaneous rate quotes from different lenders, you aren’t really getting an accurate spread.
Here’s an example rate quote breakdown to illustrate:
Lender A / Lender B
Monday 3.00% / 3.10%
Tuesday 2.96% / 2.96%
Wednesday 3.00% / 3.06%
In the example table above, we can see that Lender A and Lender B have very similar rate quotes; however, if you got a quote from Lender A on Monday, and a quote from Lender B on Tuesday, you would think Lender B would be the best option, based on who has the lowest rate. However, had you gotten rate quotes from both A and B on Monday, Lender A would have been the better choice, based on who has the lower rate.
Low Rates Aren’t The Only Important Factor
In the example above, Lender A and Lender B gave the exact same quote on Tuesday. So, how do you pick which Lender to work with when they both offer equal (or very close to equal) rates? Well, start by keeping in mind that low rates aren’t the only reason to work with a lender. You should also consider the following:
How long have they been in business?
What do their previous borrowers have to say? Check reviews online on multiple sites.
What is their rating with the Better Business Bureau?
What was your first impression when you reached out to them? Did the person you spoke with (or chatted/emailed with) seem friendly, knowledgeable, and grateful for your interest in their company’s offerings? Were they easy to communicate with?
How tech-savvy are they? Is their website up to date? Are they active on social media channels? Do they offer fast, reliable information or access to forms online?
Closing Cost vs No Closing Cost
Another factor to consider when refinancing a mortgage is whether to get a no-closing cost loan. For some homeowners, not having to pay closing costs upfront can make a lot of sense. However, those closing costs are sometimes wrapped into the overall refinance loan and factored into the payments. Either way, the closing costs will need to be low enough so that the savings from the refinance is worth your while. This can depend on other factors, too, like how long you plan to stay in the home.
If you don’t plan on owning the home for more than a couple more years, the cost of refinancing may not be worth it. If you’re unsure about this, talk to a financial advisor or mortgage professional to calculate the refinance loan’s breakeven point. This is the point at which the cost of the refinance “breaks even” with the savings. In order to really benefit from a refinance loan, most homeowners will need to own the property beyond the breakeven point.
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