Are you searching for today’s current mortgage refinance rates to get the best deal for you next home loan? Shopping for today’s best mortgage lenders can be tricky and often results in overpaying thousands of dollars in unnecessary fees. One of the most common mortgage mistakes is relying on the Annual Percentage Rate (APR) when choosing a lender.
Here are several tips to help you shop for today’s current mortgage refinance rates without leaving your hard-earned cash on the table.
Today’s Current Mortgage Refinance Rates
Shopping for the lowest current mortgage refinance rates is a confusing and frustrating process. Many lenders use discount points to make their offers stand out from the crowd. If you find refinance rates from one lender that are lower than the others check the fine print for discount points. If you’re not already familiar with points, in this case you’re paying a fee to buy down your interest rate, often unnecessarily.
Here’s Why The Annual Percentage Rate is Broken:
- It assumes you’ll keep your home loan for 30 years.
- It assumes you’ll never pay any extra towards your balance.
- It assumes you’ll never refinance again or sell.
- Choose based on APR and you’ll often get the mortgage with the highest closing costs.
Most lenders you contact provide the Truth-in-Lending disclosure statement with the APR in the upper right-hand corner. The problem with relying on the bank’s Annual Percentage Rate is that it doesn’t give you an apples-to-apples comparison of refinance rates and fees across different lenders. APR also makes several assumptions about you that invalidate the figure for most homeowners. There is a better way to compare loan offers based on both refinance rates and fees.
How to Shop for the Lowest Refinance Rates
Your neighbors overpay thousands of dollars for their home loans because they approach shopping for a home loan in the same way they shop for a kitchen appliance. Searching for the lowest current mortgage refinance rates at the expense of fees makes it difficult, even impossible to recoup your out-of-pocket expenses. If you’re not able to break even recouping your closing costs before selling or refinancing again you’re losing money no matter how low your interest rate.
How to Approximate Your Break-Even Point
As long as you’re keeping the same term-length for your next home loan (or shortening it), you can approximate your mortgage refinancing break-even point by adding up all of your closing costs and divide by the amount the monthly payment is going down. This will tell you the number of months it’s going to take to recoup your origination fee and other closing costs.
This calculation doesn’t work if you’re lengthening your term-length, going from a 15-year term to a 30-year mortgage for example. The reason it doesn’t work is that you’ll never recoup anything because of what you’re paying out in interest for all the years you’ve added to your home loan. Lengthening your term-length is one of the most common mortgage mistakes you can make.
What’s the best break-even point? Everyone’s mortgage needs are different, only you can decide if the amount of time it takes to break even is acceptable in your situation.
You can get a better deal for your next home loan by minimizing your closing costs. Paying less for the loan origination fee while avoiding unnecessary discount points and junk fees reduces the amount of time it’s going to take to reach that break-even point. The quicker you break even the more you’ll benefit from current mortgage refinance rates.
The best way to shop current mortgage rates is to compare interest rate and fees line-by-line, ignoring APR all together.
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You can learn more about finding the best deal for your next home loan while avoiding unnecessary lender fees and points by checking out my free Underground Mortgage Videos.
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