Interest rates continue their year-long slide, as economic policymakers tamp down rates amid a pandemic-fueled economic downturn.
No doubt, the pandemic has triggered discouraging news on many fronts, as millions of Americans go jobless or see their livelihoods upended by a souring economy and strict government lockdown policies.
A bright spot? Mortgage rates, which have declined throughout 2020 and have opened the door for robust refinancing deals for U.S. homeowners.
"It's no mystery why interest rates are so low," said Christopher Popkin, a real estate agent at Grace Properties in Absecon, N.J. "The Federal Reserve lowers rates in order to stimulate economic growth, as low interest rates mean consumers are more enticed to purchase homes, while still leaving money in the buyer's pockets.
"Traditionally, this happens when the economy is weak," Popkin added. "Lowering interest rates encourages home buyers to buy, refinance and invest."
Due to the pandemic, the Federal Reserve was quick to slash rates back in March as investors moved into safer investments like treasury bonds. "Last year, we were looking at interest rates around 3.25% to 4%," said Ben Schandelson, loan originator at MJS Financial LLC, in Boca Raton, Fla. "Now, we are seeing mortgage rates in the mid-to-high 2% range."
If you've been thinking of loan refinancing, visit an online marketplace like Credible to view current refinance rates or to get cash out of your home to pay off high-interest debt.
Getting the best mortgage refi deal
How can mortgage refinancing borrowers get the best deal on a mortgage loan at the best rate? Lending experts have a few ideas for borrowers.
1. Widen your search
Schandelson recommends talking to multiple lenders and brokers to find the best rate and terms. "Some lenders might give you an appraisal waiver or require only one month of assets," he said. "Borrowers should know that many lenders may pull your credit before offering a rate deal. That can result in multiple hard credit pulls that can hurt your credit."
To get the lowest rate possible, look into different mortgage options, including adjustable rate mortgages (ARMs), and always shop around by getting rate quotes from at least three lenders.
"Yes, getting preapproved for a mortgage will require a hard credit inquiry that shows up on your history," said Polina Ryshakov, director of valuation at Sundae, a residential real estate marketplace. "But it only dings your credit rating once if you have made several lending inquiries around the same time."
Explore all your mortgage refinance options by visiting Credible to compare rates and lenders. There you can compare prequalified rates from multiple lenders in just three minutes.
2. Vet your mortgage lender
Before signing on the dotted line, make sure to fully vet your mortgage lender. "Take a look at their online reviews," said April Macowicz, a broker with Big Block Realty in Lompoc, Calif. "In particular, see if they have a history of closing loans on time and if they offer cashback incentives. Check their fees and their customer service response times. These are some of the most important questions you can ask when reviewing mortgage lenders."
Use Credible's free online tool to research different mortgage refinance lenders and see what your loan options are.
3. Make sure your lender moves quickly
Mortgage refinancing borrowers should ask a potential lender how long it takes to process and approve your loan, and ask if the lender will lock in your mortgage refinancing rate at the time of application.
"Many consumers are unaware that the majority of lenders are behind due to the sheer volume of loan applications and cannot get loans through the process quickly," said Paul Buege, president of Inlanta Mortgage, a mortgage lender based in Pewaukee, Wis. "Consumers should find a lender that is willing to lock in a loan rate at application and can strongly confirm they can close a purchase loan in 30 days or less and a refinance transaction in less than 45 days."
Click here to learn more about each loan type and how to secure a lower interest rate today.
4. Don’t buy on interest rates alone
Borrowers should know the lender with the least expensive mortgage rate may not be the cheapest, once things like fees, points, and other costs are tacked on to a mortgage refinance deal. "Do your homework, and you'll get the best deal possible – being educated is your safest bet," Popkin said.
Make sure to use a mortgage refinancing calculator to get the best mortgage refinancing deal.
5. Use your leverage
Popkin recommends comparing all of your lender's terms, and the best way to do that is with a "pros and cons" list.
"If a lender's terms aren't where you want them to be, show them your other options and negotiate," he said. "Let them competitively match those points, rates, and fees to get yourself the best mortgage refinancing outcome."
Visit Credible to connect with an experienced loan officer and get your mortgage questions answered.