Many homeowners across the country are discovering the advantages of a low mortgage rate refinance. So what is it, and how can you get one? A refinance involves taking on a new mortgage with a better interest rate and term with the goal of paying off the original mortgage. Homeowners can choose not to go with their original lender, allowing them to shop around for the best rate.

So what are some reasons homeowners choose to refinance? If your credit score has improved enough to qualify you for a better rate, it may be a good time to refinance. Unlocking home equity is another popular reason. This provides extra cash for debt elimination, home renovations and the like. If you currently have an adjustable rate (ARM) mortgage, you might want to refinance with a fixed-rate mortgage to protect against high interest rates.

The best time to refinance is when the market reflects low interest rates. An easy way to ensure that your refinance is feasible is to ensure the current interest rate is at least one percent below the interest rate on your current mortgage. But you should be aware that refinancing will incur some costs; specifically, appraisals, title insurance, legal services, and realty transfer taxes, to name a few. A good rule is to not refinance unless you’re sure you can recover the cost of doing so within two years.

Another way to ensure that a refinance is worthwhile is to remain in your home for at least a few years following your refinance. This will allow your finances to re-stabilize, while putting some space between your last mortgage enquiry and your next one. Too many enquiries on your credit report that are too close together can raise a red flag to lenders and result in a higher rate.

Most importantly, homeowners wanting a low mortgage rate refinance should always consult a professional broker. Their knowledge of the ins and outs of your low mortgage rate refinance is valuable, and can protect your interests with banks and other lending institutions.

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