4 Factors that affect your mortgage refinance rate

4 Factors that affect your mortgage refinance rate


When you are in need of a home loan refinance, the first thing that you look out for is affordable interest rates. Getting the best interest rate would help you get the lowest monthly payment. If you shop around and do some research you’ll find that the interest rates vary greatly. There are several factors that affect the interest rates of refinance loans. Unfortunately, not everyone can qualify for the lowest interest rates.

Factors that will determine your interest rate


The following are the 4 factors that will affect your refinance interest rate:

1. Your credit score – This is the single most influential factor that affects your interest rate greatly. If you have a great credit score, you will have no problem in securing the lowest possible interest rate available. But if your credit score is blow, you will have to pay a higher interest rate. Your credit score would help your lenders to determine the type of borrower you are. They will charge you a higher interest rate if you pose a greater risk.

2. Type of refinance loan – The type of refinance loans also affects the interest rates. If you have opted for a fixed-rate loan, you will have to pay higher interest. With adjustable rate mortgage loan, the interest is lower at the beginning but may rise according to the market rates.

3. Term of the loan – The term of the loan also affects your interest rate. A 15 year mortgage refinance loan will have a different interest rate than a 30 year mortgage loan interest rate. The longer the term, the more likely you are to pay a higher interest rate.

4. Down payment – If you have a large down payment on your refinance loan, you will get a low interest rate. Generally if you make a down payment of 20%, you can easily get the lowest refinance rate available.

There are a number of factors that determine the interest rate of different refinance loans. You need to shop around and do a bit of research to find out what is the lowest refinance rate available to you.